On 14 August British Biotech traded options were quoted on NYSE Liffe as follows:

Assume: No transaction costs.
Required
a. Imagine you write a December 180 put on 14 August. Draw a graph showing your profit and loss at share prices ranging from l00p to 250p.
b. Add to the graph the profit or loss on the purchase of 1,000 shares in British Biotech held until late December at share prices between l00p and 250p.
c. Show the profit or loss of the combination of a and b on the graph.

Transcribed Image Text:

Calls Puts Option Sept Dec. c SeptDec March British Biotech 160 302453 177/,) 180 2 3 31 4 74, 1612 231, 16'12 27 34