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QUESTION
Stock XYZ is trading today at $50, and pays no dividends. The effective 3 month interest rate is 0. All options are European style and expire in 3...
- Stock XYZ is trading today at $50, and pays no dividends. The effective 3 month interest rate is 0.25%. All options are European style and expire in 3 months.
Option typeStrikeBidAsk
Call456.75 7.00
Put451.701.80
Call 552.152.25
Put556.907.15
Construct a bull spread using just the call options and draw its profit diagram at option expiry.
Construct the same bull spread using just put options and draw its profit diagram at option expiry.
Don't forget to take interest rates and bid/ask prices in to account.
