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espoir
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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?????

Posts: 2 | Registered: Jan 2009  |  IP: Logged | Report this post to a Moderator
kenny1703
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me too! [Frown]
Posts: 2 | From: orlando | Registered: Feb 2009  |  IP: Logged | Report this post to a Moderator
   

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