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For risk management purposes, Alanood decided to undertake a strategy consisting of buying a put...

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Accounting

For risk management purposes, Alanood decided to undertake a strategy consisting of buying a put that has a strike price of $58.5 and selling a put that has a strike price of 38.5.

The initial stock price was $40, the put premiums were $1.5 and $6.25

a/ What is the max loss? (2 marks)

b/ What is the GlL if the stock price at expiration is 42.5? (2 marks)

c/ What is the breakeven using the max gain formula? (2 marks)

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