Breakeven Prices price, common, provided, only

jbaldyga

Stock: Hop
# of Shares: 375,000
Stock Price: $26.20
September 25.00 Put Price: $0.80.
September 27.50 Call Price: $0.65.

Based on the provided data only, what is the breakeven price for

1) Protective Put
2) Covered call
3) Collar

What's common among those strategies?

zwjy

No one take this? It's part of an EOC question.

mik82

1）27
2）25.55
3）26.35

common is they all have bounded profit or loss.


for the collar, the middle part is a horizontal line which is the option price difference of the X_line. while, the underlying is a 45*line and you just have it realize the price differential profit.

Analti_Calte

deriv108 Wrote:
-------------------------------------------------------
> Stock: Hop
> # of Shares: 375,000
> Stock Price: $26.20
> September 25.00 Put Price: $0.80.
> September 27.50 Call Price: $0.65.
>
> Based on the provided data only, what is the
> breakeven price for
>
> 1) Protective Put
> 2) Covered call
> 3) Collar
>
> What's common among those strategies?


protective put = 26.20 +.80 = 27.00
covered call = 26.20-.65 = 25.55
Collar = 26.20 + .80-.65 = 26.35

A protective put is long a stock and pujt option
coveread call u are long a stock and short a call option
collar is a protective put that you fund by being short a call

Iginla2011

I agree with all of you.

All of them also have the underlying stock. In this case, the breakeven price is the initial net payment. Besides, "S0" is shown in max profit, max loss and breakeven price.

If no underlying stock in the strategy, no "S0" is shown in the Max profit, Max loss and Breakeven price.

I'll call it "Stock Check": no stock, no S0.



Edited 1 time(s). Last edit at Friday, April 8, 2011 at 03:54PM by deriv108.

NakedPuts00

I posted this because I incorrectly used X to compute B.E. price for protective put.