Question: Consider 3-month options with premium Strike Call premium Put premium 35 6.13 0.44 40 2.78 1.99 45 0 .9 7 5.08 and the effective annual

Consider 3-month options with premium Strike Call premium Put premium 35 6.13 0.44 40 2.78 1.99 45 0 .9 7 5.08 and the effective annual interest rate 8.33 . 2. write down the payoff function, profit function and draw a profit diagram for the following options : ( i). Straddle : buy a call and a put with strike 40 . ( will be good for both up / down but high premium ) . ( ii ) Strangle : buy 35 - strike put and 45 - strike call ( in ) Symmetric butterfly spreads : written 40 - strike straddle + buy 35- strike put and 45 - strike call

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