An investor bought 200 shares of a stock at $20 per share. To hedge his position, the investor also writes two 25 calls, expiring in 4 months, for a premium of $0.50 each.
a. What is his breakeven price?
b. Ignoring transaction costs, what is his profit or loss if the stock price at expiration is $18, $22 or $27?
c Draw the contingency graph