Suppose that you short one share of a stock index for 50, and that you also buy a 60 strike European call option that expires in 2 years for 10. Assume the effective annual interest rate is 3%. If the stock index increases to 75 after 2 years, what is the profit on your combined position, and what is an alternative name for the call in this context?
Suppose that you short one share of a stock index for 50, and that you also buy a 60 strike European call option that expires in 2 years for 10. Assume the effective annual interest rate is 3%. If the stock index increases to 75 after 2 years, what is the profit on your combined position, and what is an alternative name for the call in this context?
-22.64, cap
-17.56, floor
-22.64, covered call
-22.64, floor
-17.56, cap