An investor purchases a stock for $45 and a put option for $.85 with a strike pr

Question

An investor purchases a stock for $45 and a put option for $.85 with a strike price of $41. The investor also sells a call option for $.85 with a strike price of $54. What is the maximum profit and loss for this position?(Loss amount should be indicated by a minus sign. Round your answers to 2 decimal places.)

An investor purchases a stock for $45 and a put option for $.85 with a strike price of $41. The investor also sells a call option for $.85 with a strike price of $54. What is the maximum profit and loss for this position?(Loss amount should be indicated by a minus sign. Round your answers to 2 decimal places.)

Explanation / Answer

MAXIMUM PROFIT OR LOSS = SELLING PRICE - PURCHASE PRICE

MAXIMUM PROFIT = 54-45

= $9

MAXIMUM LOSS = 41-45

= - $4

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