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Draw the profit/loss diagram for an investor who shorts one share of stock and simultaneously buys one call option on that stock. The current price of the stock is S0 = $20 per share. The option exercise price is X = $30. The call option price is CE = $5.
(A.) What is this strategy called?
(B.) Draw the profit/loss diagram for this strategy. [Instructions: On the same axes, separately draw the individual components (short stock and long call) as well as the combined result of these two components. For full credit, be sure to label the axes, the breakeven points, and ALL the intercepts on both axes.
What is the value of a put option written on the same stock having the same maturity and exercise price?
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a 1230 investment has the following expected cash returnsyear net cash flow1 ................8002 ................ 2003
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What is σ, the standard deviation of the net cash flows?
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