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Business, 18.12.2019 05:31 keshaayro1618

Construct profit diagrams at expiration time to show what position in ibm puts, calls and/or underlying stock best expresses the investor’s objectives described below. ibm currently sells for $150 so that profit diagrams between $100 and $200 in $10 increments are appropriate. also assume that at-the-money puts and calls currently cost $20 each. the call with strike $140 costs $25 and the call with strike $160 costs $17.
(a) an investor wants upside potential if ibm increases but wants (net) losses no greater than $15 if prices decline.(b) an investor wants to capture prots if ibm declines in price but wants a guaranteed limited loss if prices increase.(c) an investor wants to capture prots if ibm declines in price and is ready to accept unlimited losses if prices increase. further, the investor wants to break even if the stock price does not change between now and the maturity of the options.
(d) an investor wants to prot if ibm's upcoming earnings announcement is either unexpectedly good or disappointingly bad.

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