Recall the Iron Condor strategy. Suppose the following stock and strike prices of puts and calls...
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Recall the Iron Condor strategy. Suppose the following stock and strike prices of puts and calls with identica maturity on the same stock: K1=40, K2=45, S = 50, K3=55, and K4 =60. The option premiums are: P(K1) 2, P(K2)=3, C(K3) = 5, and C(K4) = 4. (a) At what levels of Stock price relative the strike prices the payoff at expiration T to the Condor strategy equals zero? Why? (b) At what levels of stock price relative the strike prices the profit at expiration T of the Condor strategy is positive? Why? 15 points Recall the Iron Condor strategy. Suppose the following stock and strike prices of puts and calls with identica maturity on the same stock: K1=40, K2=45, S = 50, K3=55, and K4 =60. The option premiums are: P(K1) 2, P(K2)=3, C(K3) = 5, and C(K4) = 4. (a) At what levels of Stock price relative the strike prices the payoff at expiration T to the Condor strategy equals zero? Why? (b) At what levels of stock price relative the strike prices the profit at expiration T of the Condor strategy is positive? Why? 15 points
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