For problem 2, use the following information: Consider 3-month options with premium Strike 35 Call Premium Put Premium 6.13 0.44 40 2.78 1-99 45 0.97 5.08 and the effective annual interest nate 8.33% 2. write down the pay off function, profit function and draw a profit diagram for the following options: (i). Straddle: buy a call and a put with Strike 40. I will be good for both up/down but high premium). (ii) Strangle Call buy 25- strike put and 45- Strike (iii) Symmetric butterfly spreads : straddle + buy 25- Strike written put and 40- Strike 45- Strike call.
For problem 2, use the following information: Consider 3-month options with premium Strike 35 Call Premium Put Premium 6.13 0.44 40 2.78 1-99 45 0.97 5.08 and the effective annual interest nate 8.33% 2. write down the pay off function, profit function and draw a profit diagram for the following options: (i). Straddle: buy a call and a put with Strike 40. I will be good for both up/down but high premium). (ii) Strangle Call buy 25- strike put and 45- Strike (iii) Symmetric butterfly spreads : straddle + buy 25- Strike written put and 40- Strike 45- Strike call.
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
Related questions
Question
Transcribed Image Text:For problem
2,
use
the following information:
Consider 3-month options with premium
Strike
35
Call
Premium
Put
Premium
6.13
0.44
40
2.78
1-99
45
0.97
5.08
and
the
effective
annual
interest
nate 8.33%
2.
write
down the
pay off function, profit function
and
draw
a
profit diagram for the following
options:
(i). Straddle:
buy
a
call and
a put
with
Strike
40.
I will be good for both up/down but high
premium).
(ii)
Strangle
Call
buy 25- strike put and
45- Strike
(iii) Symmetric butterfly spreads
:
straddle + buy 25- Strike
written
put and
40- Strike
45- Strike
call.
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