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You short a 28-30 strangle for $9.75. This means you sell a call with a strike of 30 for $5.25, and you sell a put with a strike of 28 for $4.50. Consider 4 scenarios at maturity: 1. S(T) 20 2. S(T) = 25 3. S(T) 29 4. S(T) = 39 What is the PNL in each scenario?

You short a 28-30 strangle for $9.75. This means you sell a call with a strike of 30 for $5.25, and you sell a put with a strike of 28 for $4.50. Consider 4 scenarios at maturity: 1. S(T) 20 2. S(T) = 25 3. S(T) 29 4. S(T) = 39 What is the PNL in each scenario?

Essentials Of Investments
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
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You short a 28-30 strangle for $9.75. This means you sell a call with a strike of 30 for $5.25, and you sell a put with a strike of 28 for $4.50. Consider 4 scenarios at maturity: 1. S(T) 20 2. S(T) = 25 3. S(T) = 29 4. S(T) = 39 What is the PNL in each scenario? (PNL stands for Profit and Loss)
Transcribed Image Text:You short a 28-30 strangle for $9.75. This means you sell a call with a strike of 30 for $5.25, and you sell a put with a strike of 28 for $4.50. Consider 4 scenarios at maturity: 1. S(T) 20 2. S(T) = 25 3. S(T) = 29 4. S(T) = 39 What is the PNL in each scenario? (PNL stands for Profit and Loss)
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