What is your total profit or loss per share

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Assume that the price of Microsoft stock is currently 60$ a share. Also suppose that the excercise price for the Microsoft stock options is $60 a share for both put and call; the call price is $10 a share and put price is also $10 a share. Both options expire in 3 months . You would like to obtain a maximum profit from your firm view that the price of Microsoft stock will not move by mroe than $10 either up or down in the next 3 months. Assume that both options can only be excercised on expiration date.

a) Assume your view is correct. Describe your position in these options

b) What is your total profit or loss per share if the stock price stays at $60 at expirations ?

c) Suppose your view did not turn out to be correct and the stock price dropped to $5 at expiration. what is your total profit or loss per share?

d) Suppose your view did not turn out to be correct and the stock price increased to $80 at expiration.What is your total profit or loss per share?

(e) Below draw the per share profit profile for each of the options you've selected in part a and their combined profit at expiration (label each axis, each profile and all breakeven points)

Reference no: EM131560227

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