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The Prices of a Five-Month Call Option and a Put-Option

Question 1

Essay

The prices of a five-month call option and a put-option, with a strike price of $18, are $5 and $6 respectively. An investor is betting that there will be a big stock price move and considers that the stock price is more likely to increase than decrease. What combination should the investor take? What is the maximum loss in this strategy? _ _ _ _ _ _

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