However, technically, you never lose money in the stock market until you sell your holdings or the company goes out of business.
Ineed immediate help with this investment homework and i have no idea how to do it....please show me the step how you got the answers...
The stock is trading at $91 per share
Create a covered write position
a. At what point, do you start to lose money?
b. At what point to you make a maximum profit? What happens if the stock continues to increase?
c. Is this a low or high volatility spread? What does volatility mean?
2) Create a vertical spread
a. What is your maximum profit? At what point do you reach the maximum profit? What happens as the stock increases in value? b. What is your maximum loss? At what point do you reach the maximum loss? What happens if the stock continues to decrease in value? c. Compare a covered write to a vertical spread. What is the difference in return? What is the difference in risk? d. Is this a low or high volatility spread? What does volatility mean?
3) Create a straddle spread a. Above what point do you start making money if the stock goes up? b. Below what point do you start making money if the stock goes down? c. Where do you have a maximum loss? d. Why would you create a position like this? e. Is this a high or low volatility spread?
4) Create a vertical ratio spread a. If you have a credit from creating the spread (the value of what you sold is greater than what you bought) what is your profit or loss if the stock goes down? b. Where do you make your maximum profit? c. Above what point do you start to lose money? d. Is this
