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The market price of ABC stock has been very volatile and you think this volatility will continue for several weeks. Thus, you decide to purchase one two-month call option contract on ABC stock with a strike price of $25 and an option price of $1.30. You also purchase one two-month put option on ABC stock with a strike price of $25 and an option price of $.50. What will be your total profit on these positions if the stock price is $25.60 on the day the options expire

Respuesta :

abiolataiwo2015

Answer:

-$120

Explanation:

Calculation for What will be your total profit on these positions if the stock price is $25.60 on the day the options expire

Total profit = [1 × 100 × (-$1.30 - 25 + 25.60)] + [1 × 100 × (-$.50)]

Total profit = [1 × 100 × (-$0.70)] + [1 × 100 × (-$.50)]

Total profit =(-$70)+(-$50)

Total profit = -$120

Therefore What will be your total profit on these positions if the stock price is $25.60 on the day the options expire is -$120

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