Question 1 Draw the payoff diagrams of the following options combinations (between price range of 40-120). a) Option Type Put Call Strike 50 80 Position Long 1 Long 1 You are long 1 put option with K-50 and long 1 call option with k=80 b) Option Type Put Call Call Strike 60 Position Short 1 80 Long 1 100 Long 1 I + Cash 40 Besides you have 40 in cash, you are short 1 put option with K-60, Long 1 call options with k=80 and Long 1 call option with k=100.
Question 1 Draw the payoff diagrams of the following options combinations (between price range of 40-120). a) Option Type Put Call Strike 50 80 Position Long 1 Long 1 You are long 1 put option with K-50 and long 1 call option with k=80 b) Option Type Put Call Call Strike 60 Position Short 1 80 Long 1 100 Long 1 I + Cash 40 Besides you have 40 in cash, you are short 1 put option with K-60, Long 1 call options with k=80 and Long 1 call option with k=100.
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 1
Draw the payoff diagrams of the following options combinations (between price range of 40-120).
a) Option Type
Put
Call
Strike
50
80
Position
Long 1
Long 1
You are long 1 put option with K-50 and long 1 call option with k=80
b) Option Type
Put
Call
Call
Strike
60
Position
Short 1
80
Long 1
100
Long 1
I
+ Cash 40
Besides you have 40 in cash, you are short 1 put option with K-60, Long 1 call options with
k=80 and Long 1 call option with k=100.
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