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Clark Kent took following position in Gotham Inc. Bought 1 call at $95 and wrote 1...

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Finance

Clark Kent took following position in Gotham Inc. Bought 1 callat $95 and wrote 1 put at $75. Assume premium on call is $5 andpremium on put is $5.

1) What situation would give rise no profit no losssituation?

2) What situation would give rise to maximum loss?

3) What is the maximum possible loss?

4) What situation would give rise to maximum profit?

A) ST<=75

B) 75< St< 95

C)St <= 95

D) cannot determine

Can someone please explain how to find all 4 questions? I needthe explanation dumbed down.

Answer & Explanation Solved by verified expert
3.7 Ratings (429 Votes)
Hello Sir Mam Given that Clark Kent took 1 call 95 and wrote 1 put at 75 Hence this means that for buying call at 95 the maturity price Below or equal to 95    See Answer
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Transcribed Image Text

Clark Kent took following position in Gotham Inc. Bought 1 callat $95 and wrote 1 put at $75. Assume premium on call is $5 andpremium on put is $5.1) What situation would give rise no profit no losssituation?2) What situation would give rise to maximum loss?3) What is the maximum possible loss?4) What situation would give rise to maximum profit?A) ST<=75B) 75< St< 95C)St <= 95D) cannot determineCan someone please explain how to find all 4 questions? I needthe explanation dumbed down.

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