Assume That Call Options on Microsoft Stock with the Same

question 84

Essay

Assume that call options on Microsoft stock with the same exercise date in October are available with exercise prices $45,$55,and $65.Also assume that the price of the middle call were the average of the other two calls.Show that if you sell two of the middle calls and use the proceeds to buy one each of the other calls,your proceeds in October may be positive but cannot be negative despite the fact that your net outlay today is zero.What can you deduce from this example about option pricing?

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Precambrian

The earliest part of Earth's history, spanning the time from the formation of the planet up to 541 million years ago, before the Cambrian period.

Enculturation

The process through which individuals learn and acquire the culture of their society or group, often happening naturally through interactions within the community.

Hegemony

Predominance or influence of one group over others, often seen in political, cultural, or social contexts.

Juxtaposition

The act of placing two or more things side by side for the purpose of highlighting their differences or similarities.