Question

- Draw the following:

- The gross payoffs(do not factor in the cost of the options) of buying 2 calls and one put, graph this over stock price(x) and payoff(y) space. Assume they have the same strike.
- Draw the gross payoffs from shorting one call and one put, with the same strike
- Explain which of these graphs must you pay to have these potential payoffs and which would you expect to receive money to take the associated payoff structure?

Answer #1

Assume Strike price = $80 (for plotting graph)

A. 2 long call + 1 long put position graph:

B. 1 Short call + 1 Short put position graph:

C. Long call + Long put graph is one in which an investor shall have to pay money (option cost) to earn the payoffs whereas, the short call + short put position is the one in which an investor shall receive money.

(please do it on paper)
Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at...

Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at maturity turned out to be...

Suppose you are given the following prices for the options on
ABC stock:
Strike (in
$)
call
put
15.0
1.6
2.0
17.5
1.2
2.5
20.0
0.9
3.2
Suppose you take the following position: long one call with
strike 15.0, short two calls with strike 17.5, and long one call
with strike 20.0. Please draw the payoff at maturity.
What would be the total gain (loss) on the above position if
the stock price at maturity turned out to be...

Draw the payoff diagram for the following position: (i) long one
25-strike call, (ii)short two 30-strike calls, (iii) long one
35-strike call. Assume all options have the sameunderlying and the
same time to expiration. Be sure to label the axes of your
graph.Briefly explain how these options combine to form the
payoff diagram that you drew

A trader is purchasing three European call options with a strike
price of $45 and two put options on the same stock with a strike
price of $50. Both options have the same maturity date. The price
of the call option is $5, while the price of the put option is $4.
Create a table and a diagram illustrating the profit at termination
from these positions for various levels in the price of the
underlying. On one chart draw a...

using the options below, please answer the following
questions:
Option
Type
Strike
Premium
1
Call
40
10
2
Call
50
2
3
Put
40
3
4
Put
50
7
Which options would you buy (i.e. go long) or sell (i.e. go
short) to create a BEAR CALL SPREAD strategy
Complete the payoff and profit table for the strategy in the
table below. No need to create the graph.
ST
Payoff of option #__
Profit of option #__
Payoff of option...

XYZ Stock currently trades for $45 per share. You find the
following options matrix (prices of calls and puts) for a June 1st
expiration date (which applies for all)
40 strike call option:
$9
40 strike put option: $2
45 strike call option:
$4
45 strike put option: $4
50 strike call option:
$2
50 strike put option: $9
55 strike call option:
$1
55 strike put option: $15
You believe that XYZ will be extremely volatile in the next...

The following prices are available for call and put options on a
stock priced at $50. The risk-free rate is 6 percent and the
volatility is 0.35. The March options have 90 days remaining and
the June options have 180 days remaining.
Strike
March (calls)
June (calls)
March (puts)
June (puts)
45
6.84
8.41
1.18
2.09
50
3.82
5.58
3.08
4.13
55
1.89
3.54
6.08
6.93
Use this information to answer the following questions. Assume
that each transaction consists of...

One popular combination is the strip, which involves buying a
call and two puts with the same expiration date and strike prices.
A three month call with strike of $60 costs $4. A three month put
with the same strike price costs $3. Do you have to pay to initiate
the sale of a strip involving the above two options? For what range
of stock prices at expiration would a short position in the strip
above lead to a loss?...

One popular combination is the strip, which involves buying a
call and two puts with the same expiration date and strike prices.
A three month call with strike of $60 costs $4. A three month put
with the same strike price costs $3. Do you have to pay to initiate
the sale of a strip involving the above two options? For what range
of stock prices at expiration would a short position in the strip
above lead to a loss?...

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