You short one European call option with strike price $40 and long one European put option with strike price $37. The put and call are on the same stock and have the same time to maturity. The price of the European call is $3 and the price of the European put is $1.5. The current stock price is $39. At the option expiration date, the stock closes at $40? What are your TOTAL payoff and profits from the two option positions?

Answer rating: 100% (QA)

To calculate the total payoff and profits we need to consider two scenarios The stock price at expir... View the full answer