A call option with strike price of $100 sells for $3 whereas a call option with...

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A call option with strike price of $100 sells for $3 whereas acall option with strike price of $106 sells for $1. A ratio spreadis a portfolio with the following characteristics: long on one callwith Strike K1, shirt on 2 calls with Strike K2 (where K2>K1),Thsm, you create a ratio spread by buying one call option with thestrike price of $100 and writing two call options with the strikeprice of $106. 1) perform a what if analysis for this ratio spread(what is the net profit if the stock price ends at 0,50 100, 103,106, 120 and 1000?) What is the most you could lose in thisstrategy? What is the most you could make? What are the breakevenstock prices? make a graph showing net profit versus stock priceexpiration.

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Here ratio spread is portfolio of 1 long call option with strikeprice of 100 call price 3 and 2 short call option with strikeprice 106 call price 1What if analysis for ratio spread at See Answer

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A call option with strike price of $100 sells for $3 whereas acall option with strike price of $106 sells for $1. A ratio spreadis a portfolio with the following characteristics: long on one callwith Strike K1, shirt on 2 calls with Strike K2 (where K2>K1),Thsm, you create a ratio spread by buying one call option with thestrike price of $100 and writing two call options with the strikeprice of $106. 1) perform a what if analysis for this ratio spread(what is the net profit if the stock price ends at 0,50 100, 103,106, 120 and 1000?) What is the most you could lose in thisstrategy? What is the most you could make? What are the breakevenstock prices? make a graph showing net profit versus stock priceexpiration.