You are given the following:
Price of the stock | $18 |
Price of a three-month call at $20 | 2 |
Price of a three-month call at $15 | 5 |
a) What is the profit (loss) at the expiration date of the options if the price of the stock is $14, $20, or $25 and if the investor buys the option with the $20 strike price and sells the other option?
b) Compare the profit (loss) from this strategy with shorting the stock at $18.
c) What is the profit (loss) at the expiration date of the options if the price of the stock is $14, $20, or $25 and if the investor buys the option with the $15 strike price and sells the other option?
d) Compare the profit (loss) from this strategy with buying the stock at $18. ?
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