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T O P I C R E V I E W
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espoir
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 posted
Hi,
I don't understand this scenario.
S=44
C(K=40)=5.5
P(K=40)=1.0
1.buy stock
2.sell call
3.buy put
(Answer)
Net debit=44-5.5+1.0=39.5 (assume no commission)
Then think about 3 possible scenario.
S*:stock price at premium
I.S*=26
1.S*=26
2.C*=0
3.P*=14
Therefore, revenue=40
II.S*=40
1.S*=40
2.C*=0
3.P*=0
Therefore, revenue=40
III.S*=51
1.S*=51
2.C*=0
3.P*=-11
Therefore, revenue=40
My question is...
Where did S*, 26, 40 and 51 come from?????
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kenny1703
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posted
me too! ![[Frown]](frown.gif)
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