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What are the breakeven stock prices for trade

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1. Call options are available with strike prices of $5, $17 ½ and $20 at prices of $4, $2, and $0.5. Consider a butterfly spread.

A. What are the breakeven stock prices for this trade?

B. What are the stock prices that make this a profitable trade?

2. The current price of a stock is $94 & European call options with a strike of $95 currently sell for $4.70. An investor is trying to decide between buying 100 shares of stock and buying 2,000 call options (= 20 option contracts).

A. At what stock price would the investor be indifferent between these 2 trades?

B. At what stock prices would the investor be better off with the option contract purchase?

Reference no: EM132481502

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