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Draw the payoff diagram of this portfolio at option

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Reference no: EM132524422

Roy constructs an options portfolio based on the MXC stock. He writes a call option with exercise price $74 and writes a put option with exercise  price $70. Both options have the same expiration date.

MXC Call Option price $0.42 Exercise price $74 

MXC Put Option price $0.58 Exercise price $70

a. Draw the payoff diagram of this portfolio at option expiration as a function of MXC stock price at that time.

b. What will be the profit/loss on this position if MXC is selling at $72 on the option expiration date? What if MXC is selling at $77? 

c. At what two stock prices will Roy break even on his position?

Reference no: EM132524422

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