Consider the following strategies:

Strategy I : Buy a $90 put, sell two $95 puts and buy a $100 put

Strategy II : Sell a $90 put, buy two $95 puts and sell a $100 put

Strategy III : Buy a $90 call, sell two $95 calls and buy a $100 call

Strategy IV : Sell a $90 call, buy two $95 calls and sell a $100 call 

In the description above, a $90 put, for example, is interpreted as “a put with $90 strike price” and so on.

Which two strategies can produce the payoff structure shown in the figure below?

	A.	I and III
	B.	III and IV
	C.	II and IV
	D.	II and III
	E.	I and II

Transcribed Image Text:

payoff 2 1 0 -1 -2- -3- T T -5- -6 90 95 00 105 ST payoff 2 1 0 -1 -2- -3- T T -5- -6 90 95 00 105 ST

Answer rating: 100% (QA)

The detailed answer for the above question is provided below To produce the payoff structure shown i... View the full answer