Assume CSC Stock Is Selling at $40 in June and Hal

question 69

Essay

Assume CSC stock is selling at $40 in June and Hal places a collar on 1,000 shares of CSC stock by buying a protective put and simultaneously writing a covered call. Hal intends to sell the stock in December regardless of its price.
$$\begin{array} { | l | l | l | l | } \hline \text { Option } & \text { Strike Price } & \text { Expiration } & \text { Premium } \\\hline \text { Put } & \$ 35 & \text { December } & \$ 1.05 \\\hline \text { Call } & \$ 45 & \text { December } & \$ 1.20 \\\hline\end{array}$$ (a) What net amount did Hal pay or receive when he entered the collar?
(b) If CSC is selling at $47.50 at expiration, find Hal's cash flow at expiration.
(c) If CSC is selling at $30 at expiration, find Hal's cash flow at expiration.

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