Question

Draw the following combined option strategy SP (X₁=$67) + SC (X₂=$75). The option premiums, at the time the positions were established, were p=$4 and c=$5. In your drawing show both the payoff and profit and mark the max payoff and profit on the vertical axis. At what price do you break even?Add a table detailing the payoffs for the three applicable scenarios (i.e. S<x1<x1) for the two options separate and the complete strategy. What is this combined strategy betting on? Explain in one sentence.

Answer 1