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Home / Questions / You own 5 lots of ABB Bhd. Stock currently selling at RM 8.00. You think ABB stock is like...

You own 5 lots of ABB Bhd. Stock currently selling at RM 8.00. You think ABB stock is likely to rally over the next few weeks, yet you cannot risk losing too much. You want to participate in a potenti

You own 5 lots of ABB Bhd. Stock currently selling at RM 8.00. You think ABB stock is likely to rally over the next few weeks, yet you cannot risk losing too much. You want to participate in a potential rally without exposing yourself to too much risk. 1 lot =1000 share

The following quotes are available.

30-day ABB 8.00 call @ 0.35

30-day ABB 8.00 put @ 0.25

(i)   State the name of your strategy. [3 marks]

(ii) Outline the above strategy. [4 marks]

(iii) Graph the strategy (plot the position, label all axes, max, min points specify the option and state long or short position). [10 marks]

(iv) Outline the risk profile. [2 marks]

(v) State the maximum profit, maximum loss and breakeven point(s) in RM value.

Apr 18 2021 View more View Less

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