Which appropriate option strategy you will suggest

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Reference no: EM133264671

Question: Assume you are an investment advisor working for Seeking Alpha Inc., and a retail investor comes to you for an advice to invest in options on a stock of the firm experiencing severe operational problems and expected to have high stock price volatility over the next two-months.

a) Which appropriate option strategy you will suggest to the investor and why?
b) Estimate the breakeven point(s), maximum loss(es), and maximum profit(s) for the identified strategy.

Consider two options July 100 call and July 100 put issued on April 1 and expiring on July 31. The call premium, put premium, current stock price and risk-free rate are $7.85, $6.15, $105 and 7.45 percent, respectively.

Reference no: EM133264671

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