The table below shows the option book for the European options tradable for the share of ABC PLC expiring on 19th June 2

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The table below shows the option book for the European options
tradable for the share of ABC PLC expiring on 19th June
2020. On 1st June 2020, an investor intends to develop
an option trading strategy. The share price of ABC PLC on
1st June 2020 is 104.9p per share.
Calls
Puts
Strike
Bid
Ask
Last
Strike
Bid
Ask
Last
100
5.8
6.3
6.1
100
1.0
1.1
1.0
105
2.7
2.9
2.8
105
2.8
3.0
2.9
110
1.1
1.3
1.2
110
5.7
6.6
6.0
Question 19: Identify the
breakeven price for a long call strategy with a strike price of
110p per share
a) 108.9p
b) 108.7p
c) 110.0p
d) 111.1p
e) 111.3p
Breakeven price is a way of determining the price point at which
a product would generate no profit. In other words, it is the point
at which the sum of costs and revenues equals the sum of
revenues.
Question 20: Identify the maximal downside per
share of a strangle strategy
a) -2.1p
b) -2.4p
c) -7.6p
d) -5.9p
e) -12.9p
Question 21: Identify the net payoff per share
of a butterfly strategy using calls if the underlying share price
is 104p per share
a) 3.3p
b) 2.9p
c) 2.3p
d) 1.8p
e) 1.9p
Question 22: Identify the maximal downside per
share of an optimal butterfly strategy
a) -0.7p
b) -1.1p
c) -2.1p
d) -2.2p
e) Unlimited
Question 23: Identify the net payoff per share
of a strap strategy if the underlying share price is 108p per
share
a) -2.2p
b) -2.8p
c) -2.9p
d) -5.3p
e) -5.9p
Question 24: Assume the investor expects the
share price of ABC on 19th June 2020 to equal 96p per
share. Identify which of the following strategies a rational
investor would prefer
a) Butterfly
b) Straddle
c) Strangle
d) Strip
e) Strap