You purchased a stock for $43 a share, a call option with an exercise price of $40 and a premium of $5, and a put option with an exercise price of $45 and a premium of $4. What will be your net profit if you close out all three positions when the stock is selling for $48 a share?
A) -$9
B) -$4
C) $5
D)$4

Question

Quizplus · Accepted Answer

Net profit = ($48 - 43) + Max[$48 - 40, $0] + Max[$45 - 48), $0] - $5 - 4 = $4

You Purchased a Stock for $43 a Share, a Call