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Assume you are buying stock in Exxon. You buy a share of stock at 77.39, and...

Assume you are buying stock in Exxon. You buy a share of stock at 77.39, and a put option at 75 for 3.95. You sell a call option at 80 for 2.80. You hold your portfolio until the expiration date. On the expiration date you cash out your portfolio. Using excel, graph the profits of your strategy as the price of Exxon stock at the expiration date goes from 50 to 100. (Your graph should include at least 50 data points and a table explaining each data point.)

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Calculation of total profit of the portfolio assuming price at maturity of $90.For put option buyer, gain occurs when asset price falls. Put option gives option buyer the right to sell the Stock at a strike price Profit of put option buyer is given by following equation Profit of put options Max(X-ST,0)-p where ST is stock price at maturity, X is exercise price and p is premium paid to buy the put option 10 Call option gives option buyer the right to buy the Stock at a strike price at a specified time in future Profit of Call option buyer is given by following equation: Profit of Call option Max(Sr-X,0) -c where ST is stock price at maturity, X is exercise price and c is premium paid to buy the Call option 12 13 15 16 17 18 19 20 21 Profit of Call option seller is given by following equation Profit of Call option seller -(Max(Sr-X,0)-c) where ST is stock price at maturity, X is exercise price and c is premium paid to buy the Call option Price at the maturit 90.00 Price per share or Exercise Price option Buv or Se Quantity Profit (Loss 23 24 25 26 27 Share Put Call 77.39 Bu $3.95 Bu 2.80 Sell 1$12.61G23 (D20-E23) 1 ($3.95-G24 (MAX D24-D20,0)-E24 $75 $80 $7.20G25*-(MAX(D20-D25,0)-E25) $1.46 -SUM(H23:H25) Total

Calculation of total profit for the price at maturity in the range of $50-$100.28 Stock Price at expiraiton Total Profit $3.54) |-SG $23( C30-SE$23)+SG$24(MAx(SD$24-C30,0)-SE$24)-$G$25*(MAX(C30-$D$25,0)-SE$25) $3.54 $3.54 $3.54 $3.54 $3.54 $3.54 S3.54 ($3.54 51 52 53 32 Total Profit 35 36 37 57 $0.00 100 39 59 ($3.54 (S1.00) ($2.00) ($3.00) ($4.00) $3.54 61 41 42 43 63 47 67 S3.54 $3.54 $3.54 $3.54 $3.54 $3.54 $3.54 $3.54 $2.54 ($1.54 ($0.54 0.46 $1.46 $1.46 $1.46 S1.46 $1.46 $1.46 $1.46 $1.46 $1.46 $1.46 $1.46 $1.46 $1.46 $1.46 1.46 $1.46 1.46 1.46 $1.46 $1.46 $1.46 49 51 52 53 54 71 72 73 74 57 78 59 61 62 63 81 83 67 87 69 71 72 73 91 92 93 75 76 95 97 78 98 100

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