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Payoff relationships under trading strategy for careplus ltd

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Reference no: EM132594577

The common stock of Careplus Ltd. is currently trading at a price of $42. Both a put and a call option are available for Careplus, each having an exercise price of $40 and an expiration date in exactly six months. The current market prices for the put and call are $1.45 and $3.90, respectively. The risk-free holding period return for the year is 8 percent. Draw a graph of these payoff relationships under these trading strategy for the Careplus Ltd. prices of 20, 25, 30, 35, 40, 45, 50, 55, 60. (1) buy one Careplus call option, and, (2) short one Careplus call option

Reference no: EM132594577

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