Question A4 (Monitoring Your Position). Let's use the following information for Question A4. Assume that...
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Question A4 (Monitoring Your Position). Let's use the following information for Question A4. Assume that you have bought BHP October 49 some time ago when the common share price was $46, the strike price of the call is $49 and each call costs you $3 (column 1). The 2nd column gives data for today's information which are self-explainable given you are taking this unit. Original Trade Current Prices BHP Common: 46 BHP Common: 54 Bought BHP October 49: 3 BHP October 49: 6 BHP October 58: 2 Table 3: Updated Market (Question A4) Each of above four follow-up actions would produce different levels of risk and reward from today onwards. Use the following table as a template to compare these alterna- tive strategies at expiration and label the best and worst strategies for each scenario. Comment on your analysis results. (Words limit: 300; 15 Marks) BHP Price Do nothing" "Liquidate" "Roll up" "Spread" Expiration Profit Profit Profit Profit 49 or below 50 52 54 56 58 60 62 64 Table 4: Strategy Comparing (Question A4)
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