An investor with $76,000 to invest feels that NextEra Energy's (NYSE: NEE) stock price will...
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An investor with $76,000 to invest feels that NextEra Energy's (NYSE: NEE) stock price will go up over the next six months. The current stock price is $76 and the price of a sixmonth call option with a strike of 75 is $6.4 per share. The investor can invest the money in stocks or in options. a) If the stock price turns out to be $85 per share in six months and answer the following questions. i. If the investor invests all his money in the stock, how much is his profit? ii. If the investor invests all his money in the option, how much is his profit? b) If the stock price turns out to be $65 per share in six months, repeat the two questions in part a) and calculate the loss on stocks and options. c) How high does the stock price have to rise for the option strategy to be as profitable as an investment in the stock
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