You run a mutual fund and you have decided that the most that Sears stock is worth is $20 and you plan on selling the stock when it reaches that point. What option strategy could you take to make a profit on your planned trade?
Using the following information calculate the portfolio value on the exercise date and the profit from your strategy.
Stock Price Today = $18.22
Strike Price = $20
Call Price = $2.54
Put Price = $3.35
Scenario 1. Sears’ stock price rises to $25 on the exercise date.
Scenario 2. Sears’ stock price falls to $15 on the exercise date.