An investor purchases a stock for $41 and a put for $.65 with a strike price of

Question

An investor purchases a stock for $41 and a put for $.65 with a strike price of $36. The investor sells a call for $.65 with a strike price of $46. What is the maximum profit and loss for this position? (Loss amount should be indicated by a minus sign.)

An investor purchases a stock for $41 and a put for $.65 with a strike price of $36. The investor sells a call for $.65 with a strike price of $46. What is the maximum profit and loss for this position? (Loss amount should be indicated by a minus sign.)

Explanation / Answer

Maximum profit = Strike price - Current price + Call option premium

= $46.00 - $41.00 + $0.65

= $5.65

Maximum loss = Strike price - Current price - Put option premium

= $36.00 - $41.00 - $0.65

= -$5.65

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