if you sell calls you are taking in premium...in this case you will be selling oil at 136. you will be shorting oil at 130. if oil prices stay at 115 to 120, you'll make the 6 bucks of premium...but did not address the risk of the project.
if you bought puts at 130 at 6 bucks, the breakeven is 124. therefore, provided you bought the right number of puts, should oil prices go down to 95 you are hedged by the increase in the value of the puts. that would protect the rest of the firm from the potential crash of oil, which fulfills your mandate.
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Jae-Yoon Kim
None
Seaside CA
United States
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Original Message:
Sent: 10-21-2020 03:38 PM
From: Syed Yousuf Jamal
Subject: Please explain the below question for options P2