About the option payoffs, Draw a position diagram showing

About the option payoffs

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Reference no: EM131490147

Option payoffs

Suppose that Mr. Colleoni borrows the present value of $100, buys a six- month put option on stock Y with an exercise price of $150, and sells a six-month put option on Y with an exercise price of $50.

a. Draw a position diagram showing the payoffs when the options expire.

b. Suggest two other combinations of loans, options, and the underlying stock that would give Mr. Colleoni the same payoffs.

Reference no: EM131490147

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