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1. Suppose the underlying stock is priced at $23.5, you buy a call option with strike price of 22.5 for $2.5 and you buy a put option with strike price of $25 for $1.5 both options expiring in 1 month. Draw the net payoff diagram of the strategy and explain in what direction of the market this strategy will be profitable?

2. Suppose the underlying stock is priced at $23.5, you perform the following 4 options trades: Buy a call option with strike price of 20 at $2.5 Sell a call option with strike price of 22.5 at $1.75 Sell a call option with strike price of 25 at $1.25 Buy a call option with strike price of 27.5 at $1 Draw the net payoff diagram of the strategy and explain in what direction of the market this strategy will be profitable?

3. Suppose the underlying stock is priced at $23.5, you perform the following 4 options trades: Buy a call option with strike price of 27.5 at $1.5 Sell a call option with strike price of 25 at $2 Buy a put option with strike price of 20 at $1.5 Sell a put option with strike price of 22.5 at $1.5 Draw the net payoff diagram of the strategy and explain in what direction of the market this strategy will be profitable?

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Financial Management, Finance

Category:- Financial Management
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