Consider the Purchase of a Put Option with an Exercise

question 44

Essay

Consider the purchase of a put option with an exercise price of $40 and a cost of $5 and the purchase of a call option with the same expiration date and on the same stock with an exercise price of $45 and a cost of $6.Graph the profit of this combination.Be sure to label all points.

---

Definitions:

Political Economy

An interdisciplinary field that examines the relationship between politics and economics, including how political institutions, the political environment, and the economic system influence each other.

Reinventing Government

A movement or approach aimed at improving governmental efficiency, innovation, and responsiveness to citizens' needs through strategies such as privatization, decentralization, and technology use.

Cost-benefit Analysis

A systematic approach to estimating the strengths and weaknesses of alternatives used to determine options that provide the best approach to achieve benefits while preserving savings.