What is name of strategy-what is maximum profit of trader

Assignment Help Financial Management
Reference no: EM131605849

Consider the following strategy: sale of one call with the exercise price X1 = $75 for $6, sale of one call with the exercise price X2 = $80 for $4, buy of one call with the exercise price X3 = $70 for $9, and buy of one call with the exercise price X4 = $85 for $2.

a) Graph the profit diagram to this strategy AND PROVIDE NAME OF THE GRAPH.

b) What is the maximum profit of a trader?

c) What is the maximum loss?

d) What is the name of this strategy?

e) What is a trader betting on when he/she is employing such a strategy?

Reference no: EM131605849

Questions Cloud

According to the constant dividend growth model : According to the constant dividend growth model, if the required return is 15 percent, what should the value of the stock be two years from now?
What is the after-tax cost of capital for debt financing : What is the after-tax cost of capital for this debt financing?
Time value of money problems : How long will it take for a $2,000 investment to double in value? What will be the value of 20 years of $500 invested at the end of each year for next 20 years.
Substation effect of real interest rate on savings is zero : If Lisa's substation effect of real interest rate on savings is zero,
What is name of strategy-what is maximum profit of trader : What is the maximum profit of a trader? What is the name of this strategy? What is a trader betting on when he/she is employing such a strategy?
Internal common equity and external common equity : Calculate the cost of (a) internal common equity and (b) external common equity.
Brand defined benefit pension plan : Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.4% × service years × final year's salary, payable at end of each yea
What is a swap and why is it off-balance-sheet : What is a swap? Why is it off-balance-sheet?
Groups occupying recognizable places of business-government : A unit that consists of individuals or groups occupying recognizable places of business, residence, government, or assembly is termed a(an)

Reviews

Write a Review

Financial Management Questions & Answers

  What was the firms operating cash flow

The 2013 balance sheet of Maria's Tennis Shop, Inc., showed long-term debt of $2.7 million, and the 2014 balance sheet showed long-term debt of $2.9 million. The 2014 income statement showed an interest expense of $140,000. What was the firm’s 2014 o..

  How much would the price of bond change

How much would the price of bond change if investors required return changes to 8% per year?

  Task 1 understand the sources of finance available to a

task 1 understand the sources of finance available to a businesstask 1.1 the business bull explain the type of business

  Find the total cost of this system per year

A Company has to pay $400,000 annually in checks. Find the total cost of this system per year.

  What should the company expect to pay for its loan

A company has hired you to analyse how much money can it borrow. What should the compny expect topay for its loan?

  What is the effective rate-nominal rate and periodic rate

What is the effective rate, the nominal rate and the periodic rate of this investment? Does your equal payment period match your compounding period?

  The initial cost of a piece of equipment

The initial cost of a piece of equipment is $10,000, and it has a salvage value at the end of its 10 year life of $1,000. Maintenance cost is estimated to be $500 the first year and increase $50 per year to the end of its 10 year life. If the company..

  About the bond valuation

An investor has two bonds in his portfolio that both have a face value of $1,000 and pay a 8% annual coupon. Bond L matures in 11 years, while Bond S matures in 1 year. What will the value of the Bond S be if the going interest rate is 5%? Why does t..

  Maintain a constant growth rate in its dividends

If it’s the company’s policy to always maintain a constant growth rate in its dividends, what is the current dividend per share?

  Equally weighted portfolio of stocks within an industry

What is the volatility? (standard deviation) of an equally weighted portfolio of stocks within an industry in which the stocks have a volatility of 40% and a co

  What is the stocks value per share

Smith Technologies is expected to generate $50 million in free cash flow next year, and FCF is expected to grow at a constant rate of 6% per year indefinitely. Smith has no debt or preferred stock, and its WACC is 15%. If Smith has 40 million shares ..

  What is the maximum number of new shares of common stock

Aspin Corporation’s charter authorizes issuance of 2,900,000 shares of common stock. Currently, 1,200,000 shares are outstanding, and 400,000 shares are being held as treasury stock. The firm wishes to raise $104,500,000 for a plant expansion.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd