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Several rumours concerning Wyslow have started circulating.These rumours are causing the market price of the share to be quite volatile.Given this situation,you decide to buy both a one-month put and a call option on this share with an exercise price of €15.You purchased the call at a quoted price of €.20 and the put at a price of €2.10.What will be your total profit or loss on these option positions if the share price is €4 on the day the options expire?
Noise Traders
Investors who make decisions based on random or irrelevant information, often causing market prices to deviate from their true values.
Limits To Arbitrage
Restrictions or impediments that prevent traders from taking advantage of discrepancies in prices between or within markets to make risk-free profits.
Representativeness Heuristic
The reliance on stereotypes, analogies, or limited samples to form opinions about an entire class.
House Money
A term from Behavioral Finance referring to the tendency of individuals to take greater risks when trading with profits from prior trades, viewing it as "play money."
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