a). Suppose that you buy a six-month put option on stock Y with an exercise price of $150, and sells a six-month put option on Y with an exercise price of $50. Draw a position diagram showing the payoffs when the options expire. Do you think when this combined position is useful? 7. If you can't sell a share short, you can achieve exactly the same final payoff by a combination of options and borrowing or lending. What is this combination?

b) If you can't sell a share short, you can achieve exactly the same final payoff by a combination of options and borrowing or lending. What is this combination?

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a Position Diagram for the Combined Put Option Position To draw the position diagram we need to consider the payoffs for the put options with differen... View the full answer