Several rumors concerning Nu-Tek stock are causing the market price of the stock

Question

Several rumors concerning Nu-Tek stock are causing the market price of the stock to be quite volatile. Given this situation, you decided to buy both a one month European $10 put and a one month European $10 call on this stock. The call premium is $.35 and the put premium is $1.60. What will your net profit
or loss be on these option positions if the stock price is $7 on the day the options expire?
ignoring trading costs and taxes.
a) -$495 b)-$35 c)$105 d)$140 e)$175
please show how you got the answer

Explanation / Answer

c)$105 Profit on Put option= 10-7-1.6= 1.4 Loss on call option= .35 Total profit= (1.4-.35)x 100= $105

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.