question archive The current price of a stock is Rs 40 and the continuously compounded risk-free r = 8%
The current price of a stock is Rs 40 and the continuously compounded risk-free r = 8%
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The current price of a stock is Rs 40 and the continuously compounded risk-free r = 8%. You sold a 40-strike call
with 3 months to expiration at a premium Rs 2.78 and at the same time you bought a 40-strike call with 1 year
to expiration for a premium Rs 6.28. The theta for the long call is -0.0104 and that for the short call is -0.0173.
Find the profit once the sold option has expired, if the stock price remains at Rs 40 and nothing else has changed.
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