Consider the following option strategy where the options are all for the same stock that does not pay a dividend and all the options have the same maturity:  

Long one call with $100 strike price bought for $6  

Long one call with $90 strike price bought for $20

Short one call with $105 strike price sold for $8  

Short one call with $95 strike price sold for $16

 

(a) draft a table of the payoffs to this strategy where the payoffs are displayed for stock prices at maturity for stock prices from $80 to $120 in increments of $5. Also draw a picture of the value of the position at expiration as a function of the stock price. (b) Draw a picture of the investor's "profit" at expiration as a function of the stock price.

Answer rating: 100% (QA)

a Payoff Table and Position Value at Expiration Lets calculate the payoffs for the given option stra... View the full answer