An investor purchases a call option with an exercise price of $55 for $2.60. The same...

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Question

An investor purchases a call option with an exercise price of $55 for $2.60. The same...

An investor purchases a call option with an exercise price of $55 for $2.60. The same investor sells a call on the same security with an
exercise price of $60 for $1.40. What is the payoff of the investor's strategy?

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Answer 1

Answer #1

Payoff = (S_T - $55) - (S_T - $60)

= $56.75 - $55

= $1.75 .

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Answer 2

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