You think that a stock price is going to swing into a certain range. Hence, in order to limit your risk (and your return as well), you decide to buy one put for $7 with exercise price of 110; buy one put for $1 with exercise price of 95; sell one put for $4 with exercise price of 105; and sell one put for $2 with exercise price of $100.
(a) What is your maximum profit and maximum loss of this option strategy? (hint: using a table, develop profit and loss scenarios for the following stock prices: $90, $100, $105, $110) (Note that each option contract includes 100 stocks)
(b) What is your breakeven point?
