Analyze the dual trade to the third butterfly trade in Table 5 8 Thus go long a put at 80, short 2 puts at 75, and long a put at 70 Let the starting price be S 0 70 and assume the drift is 2 Data given in Table 5 8 Table 5 8 T 21, r 0 03 Trade Stock Price Max Drift Total Gain Ex calls at price (net...

The dual trade to the third butterfly trade in Table 58 is a long put at 80 short 2 puts at 75 and a long put at 70 This trade has a net debit of 119 a maximum loss of 2 and a drift of 2 To analyze th ...

Analyze the dual trade to the third butterfly trade in Table 5.8. Thus go long a put

Question:

Analyze the dual trade to the third butterfly trade in Table 5.8. Thus go long a put at 80, short 2 puts at 75, and long a put at 70. Let the starting price be S₀ = 70 and assume the drift is −2 %.

Data given in Table 5.8

Table 5.8 T = 21, r = 0.03 Trade: Stock Price Max Drift Total Gain Ex- calls at price (net loss (%) loss prob