JUST answer the Q19 a b QUESTION 18 A call option on Santos Limited shares with an exercise price of

JUST answer the Q19 a b

QUESTION 18 A call option on Santos Limited shares with an exercise price of $7.25 per share, expiry in two months, is currently trading at $0.70. The put option with the same exercise price and date is trading at $0.95. Draw a fully labeled diagram of the long call and short call positions. Indicate the areas in which either option is in the money”. Upload a picture or pdf of your diagram. Attach File Browse My Computer QUESTION 19 Continue from previous question: A call option on Santos Limited shares with an exercise price of $7.25 per share, expiry in two months, is currently trading at $0.70. The put option with the same exercise price and date is trading at $0.95. a. Your friend is very excited. He found an easy way to get rich: “Long a put and a call with the same strike price and one of them will always be in the money!!!!” You can use your pay-off diagram(s) to explain the error in his plan. b. Beyond which share prices does your friend's strategy become profitable? (Remember: He paid for BOTH options) T T T F Paragraph Arial % DO 90 E fx Mashups – 16 © © 3 (12pt) != – E – T- T T Os T 1 – – – H D HTML CSS B Path:p Words:0 LONG CALL Profit Unlimited $7075 profit 2+ too a toir + x 1 I max. coss struke price SHORT CALL ” breakenen point – 2 4 6 l stike price Unlimited loss

 

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