Investments

Assume an option trader bought 10 July 25 calls on General Electric Co. (GE) for 1.35.

If the stock closed at 28 on expiration and the option position was liquidated, calculate the dollar amount of profit or loss on the trade before commissions and taxes.

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Assume an investor establishes a straddle position on Chevron Corp. (CVX) by buying a December 95 call priced at 1.50 and simultaneously buying a December 95 put priced at 3.50.

Graph the profit picture of this straddle position.

1. In a typical year, what percentage of actively managed mutual funds are able to outperform their benchmarks?

2. Why do many portfolio managers still utilize fundamental analysis in selecting stocks when the Efficient Market Hypothesis says that it’s not of any benefit in selecting stocks?

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