Question

You sell one Hewlett Packard August 50 call contract and buy one Hewlett Packard August 50 put contract. The call premium is $1.25 and the put premium is $7.00. Your strategy will pay off if the stock price is __________ in August.
A. either lower than $44.25 or higher than $55.75
B. between $44.25 and $55.75
C. higher than $55.75
D. lower than $44.25

Answer 1

Answer:

B. between $44.25 and $55.75

Explanation:

Calculation for Your strategy that will pay off if the stock price is in August.

Positive profit in the range= $50 - ($1.25 + $4.50)

Positive profit in the range=$44.25

Positive profit in the range=$50 + ($1.25 + $4.50)

Positive profit in the range=$55.75