(Stock Repair strategy) Beulah and Biff buy 100 shares of XYZ @ $50. It declines in price to $40 per share. They have hopes of a modest recovery and want to break-even on the trade. They buy 1 Call with a strike of $40 for $8 per share quoted price and sell 2 Calls with a strike of $45 for $4 per share quoted price. Find the P&L, Y, at expiration if the stock price is $40 _______ (per share quoted price) $45 ___________ (per share quoted price) $60 ___________ (per share quoted price)
Added by Justin E.
Step 1
They bought 100 shares at $50, so their initial investment was $5,000. The stock declined to $40, so their current investment is worth $4,000. To break even, they need the stock to rise by $1,000, or $10 per share. Show more…
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