Monday, February 9th, 2015

Help in an exam?

An investor buys a stock at $ 50. When the stock fell to $ 40 began the repair strategy by buying the 40 calls and write 45 calls. With three weeks left before expiry of the stock is now trading at $ 48 and the inverter is now feeling very optimistic about stocks. Which of the following best describes your situation? A. He could rest his options position immediately, but should do so at a loss since the stock is above the short-term options? exercise price. B. He could rest his options position immediately, and may be able to do so at a loss or gain, depending on the current price options. C. If she maintains her position until the expiration will be able to relax its position on options for the same amount of money or credit as long as the stock is at $ 45 or less. D. None of the above. Both E. B and C

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One Response to “Help in an exam?”
  1. Rabbit says:

    B, unwind. Actually, as soon as one became the obvious winner and the other the obvious loser in a hedging spread, you step out of the losing side.

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