Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of $57 per barrel. She simultaneously sells a put option on 50,000 barrels of oil with the same exercise price of $57 per barrel. If oil price is $52 at the maturity, what is her payoff?

Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of $57 per barrel. She simultaneously sells a put option on 50,000 barrels of oil with the same exercise price of $57 per barrel. If oil price is $52 at the maturity, what is her payoff?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Question

Suppose a financial manager buys call options on 50,000 barrels of oil with an exercise price of $57 per barrel. She simultaneously sells
a put option on 50,000 barrels of oil with the same exercise price of $57 per barrel. If oil price is $52 at the maturity, what is her
payoff?
Select one:
O a. $250,000 loss
O b. $0
O c. $100,000 loss
O d. $100,000 gain

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