Explain the risks and potential benefits

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Reference no: EM132546696

An investor enters into the following option strategy:

The investor purchases 9 puts with a strike price of $26 and premium of $9.54/share

The investor sells 3 calls with a strike price of $50 and a premium of $1.10/shareshare

The investor sells 4 calls with a strike price of $53 and a premium of $0.06/share

A.1. What is the breakeven point of the overall option strategy? If you solve for multiple breakeven points, record your answer as the breakeven point that is numerically the largest.

A.2. Draw the profit and loss graph for the overall option position. Be sure to label the axis with important/relevant points.

A.3. In one to two paragraphs, discuss the profit and loss graph of the option strategy. Explain the risks and potential benefits. Be thorough and specific with respect to the options included within the strategy.

Reference no: EM132546696

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