A trader buys a put option with strike $$85$ and buys a call option with a strike of $$95,$ both with the same maturity T$,$ with $2$ months to expiration. The call option trades at $$4$ and the put option trades at $$4\mathrm{.}50.$ The current share price is $$90.$ Assuming the trader holds this until maturity, to time t$,$ which of the following describes the payoff profile of this options position?

Question $13$Answer

a$.$

The maximum loss is $$0\mathrm{.}50,$ the maximum gain is $$95$ and break even is $$90\mathrm{.}50$

b$.$

The maximum loss is unlimited, the maximum gain is $$8\mathrm{.}50,$ the breakeven price is $$81\mathrm{.}50$

c$.$

The maximum loss is $$8\mathrm{.}50,$ the maximum gain is unlimited, there are breakeven points at $$76\mathrm{.}50$ and $$103\mathrm{.}50$

d$.$

The cost of this options position is $$180,$ the stock must rise $$4$ or fall $$4\mathrm{.}50$ in order to breakeven

e$.$

The maximum loss is $$8\mathrm{.}50,$ the maximum gain is $$81\mathrm{.}50,$ there are breakeven points at $$76\mathrm{.}50$ and $$103\mathrm{.}50$