A speculative investor creates a portfolio of options written on the same underlying asset. He chooses to sell a put option with a strike of $100 and sell a call option also with a strike of $100. The two options have the same expiration. a. Sketch the payoff at maturity for a seller of a put option with a strike of $100. Carefully label the axes. b. Sketch the payoff at maturity for a seller of a call option with a strike of $100. Carefully label the axes. c. Sketch the payoff at maturity for the investor who sells both a call option and a put option each with a strike of $100. Carefully label the axes. The put option price is $14, and the price of the call option is $6. d. What is the profit at maturity for the speculative investor if the underlying asset at maturity is worth $100?
A speculative investor creates a portfolio of options written on the same underlying asset. He chooses to sell a put option with a strike of $100 and sell a call option also with a strike of $100. The two options have the same expiration.
a. Sketch the payoff at maturity for a seller of a put option with a strike of $100. Carefully label the axes.
b. Sketch the payoff at maturity for a seller of a call option with a strike of $100. Carefully label the axes.
c. Sketch the payoff at maturity for the investor who sells both a call option and a put option each with a strike of $100. Carefully label the axes. The put option price is $14, and the price of the call option is $6.
d. What is the profit at maturity for the speculative investor if the underlying asset at maturity is worth $100?
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