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Explain to aunt what the payoff profiles mean

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Reference no: EM132933969

Aunt Betty has heard about payoff profiles from the Business News Network (BNN) and would like to learn more about them. Draw the payoff profiles for the following four positions:

  1. long position in the 42-call (i.e., the Suncor call option with strike price of $42)
  2. short position in the 42-call
  3. long (purchased) Suncor stock
  4. a hedged position with one long (purchased) Suncor stock and one short position in the 42-call.

Problem 1: Ignore the call premium in your payoff profile plots. Carefully explain to your aunt what these payoff profiles mean. Be clear and concise, as your aunt gets impatient with long, drawn-out explanations when they are unnecessary.

Reference no: EM132933969

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