Suppose the options have a bid-ask spread. If you are creating a synthetic purchased stock and the net premium is zero inclusive of the bid-ask spread, where will the strike price be relative to the forward price?
Suppose you enter into a long 6-month forward position at a forward price of $60. What is the payoff in 6 months for prices of $50, $55, $60, $65, and $70? Suppose that instead you buy a 6-month call option with a strike price of $60. What is the payoff in 6 months at the … Read more