Question

When xyz stock is at 72 1/2, an investor buys 10 xyz june 60 calls @ 23 1/2 and sells 10 xyz june 90 calls @10. what is the investor's maximum profit potential?

Answer 1

when xyz stock is at 72 1/2, an investor buys 10 xyz june 60 calls @ 23 1/2 and sells 10 xyz june 90 calls @10. the investor's maximum profit potential is 7 xyz

Answer 2

"Cost of xyz =72 ½

Investor buys 10 xyz 60 calls@ 23 ½

Investor sells 10 xyz 90 calls @ 10

Thus, the maximum profit potential of the investor will be $16,500.

It is calculated by ascertaining that the debit spread is the difference between the strike prices i.e. purchases at 231/2 and sells at 10. Now, after adjusting their premiums, the maximum profit will be calculated.

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