The common stock of Matterport Corporation has been trading in a narrow price range for the past a few months, and you a
Posted: Wed May 18, 2022 10:29 pm
The common stock of Matterport Corporation has been
trading in a narrow price range for the past a few months, and you
are convinced it is going to break far out of that range in the
next 1 year. You do not know whether it will go up or down,
however. The current price of the stock is $120 per share, and the
price of a 1-year call option at an exercise price of $120 is $12
and the put premium with the same strike price and expiration date
is $10
What would be a simple options strategy to exploit your
conviction about the stock price’s future movements?
What would be the payoff and profit at expiration date
of your strategy?
Calculate the breakeven stock price(s) at the expiration
for this strategy.
What would be your profit if the stock price increases
by 15% at the expiration for this strategy?
trading in a narrow price range for the past a few months, and you
are convinced it is going to break far out of that range in the
next 1 year. You do not know whether it will go up or down,
however. The current price of the stock is $120 per share, and the
price of a 1-year call option at an exercise price of $120 is $12
and the put premium with the same strike price and expiration date
is $10
What would be a simple options strategy to exploit your
conviction about the stock price’s future movements?
What would be the payoff and profit at expiration date
of your strategy?
Calculate the breakeven stock price(s) at the expiration
for this strategy.
What would be your profit if the stock price increases
by 15% at the expiration for this strategy?