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Short a call option with a strike price of $1.25 and a premium of $0.12. Long a...

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Finance

Short a call option with a strike price of $1.25 and a premiumof $0.12.

Long a call option with a strike price of $1.35 and a premium of$0.02.

Short a put option with a strike price of 41.35 and a premium of$0.03.

a. Draw the final contigency graph(include break even, max loss,max gain)

b. Compare your final graph with one of the three originalgraphs(from the question). Tell me if you see an opportunity tomake some money. If so, how would you do it?

Answer & Explanation Solved by verified expert
3.7 Ratings (655 Votes)
Payoff MAXStock Price1250Call strike125 premMAXStockPrice1350Call    See Answer
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Transcribed Image Text

Short a call option with a strike price of $1.25 and a premiumof $0.12.Long a call option with a strike price of $1.35 and a premium of$0.02.Short a put option with a strike price of 41.35 and a premium of$0.03.a. Draw the final contigency graph(include break even, max loss,max gain)b. Compare your final graph with one of the three originalgraphs(from the question). Tell me if you see an opportunity tomake some money. If so, how would you do it?

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