The buyer of the call
1. “The buyer of the call and the seller of the put both hope that the stock price will rise. Therefore the two positions are identical.” Is the speaker correct? Illustrate with a position diagram.
2. Pintail’s stock price is currently $200. A one-year American call option has an exercise price of $50 and is priced at $75. How would you take advantage of this great opportunity? Now suppose the option is a European call. What would you do?