Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity. Strike Price Option Price In $ Call Option Put Option 32 $3.1 $1.1 40 $2.9 $1.5 45 $2.7 $2.0 48 $2.5 $2.6 Suppose that an investor is interested to construct a butterfly spread using call option information above. If the market price of underlying at maturity is $45, complete the table below?
Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity. Strike Price Option Price In $ Call Option Put Option 32 $3.1 $1.1 40 $2.9 $1.5 45 $2.7 $2.0 48 $2.5 $2.6 Suppose that an investor is interested to construct a butterfly spread using call option information above. If the market price of underlying at maturity is $45, complete the table below?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION 22
Followings are the strike prices and the relevant options prices for both put and call options. All options are of same maturity.
Strike Price
Option Price
In $
Call Option
Put Option
32
$3.1
$1.1
40
$2.9
$1.5
45
$2.7
$2.0
48
$2.5
$2.6
Suppose that an investor is interested to construct a butterfly spread using call option information above. If the market price of underlying at maturity is
$45, complete the table below?
Option ST K
Position
f (premium, price,
value)
Net Pay off
$45 $
24
Long
call
24
Short
call
$45 $
%24
%24
%24
Short
call
$45 $
ll ona
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Transcribed Image Text:40
$2.9
$1.5
45
$2.7
$2.0
48
$2.5
$2.6
Suppose that an investor is interested to construct a butterfly spread using call option information above. If the market price of underlying at maturity is
$45, complete the table below?
Option ST K
Position
f (premium, price,
value)
Net Pay off
$45 $
Long
cll
2$
$
Short
call
$45 $
%24
2$
Short
call
$45 $
%24
24
Long
call
$45 $
$
24
Strategy cost
24
Strategy Pay off
%24
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