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Describe the relation between the payoff and stock price

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Reference no: EM131307454

Option Trading Strategies

Part 1: Bull Spread
A) Consider buying a call option with a strike of $30 and a selling call option with strike of $40. Fill in the table for the payoffs of the bull spread.

B) Plot the graph of the stock price (x-axis) vs. the total payoff (y-axis) for the bull spread. Label the axes and chart title.

Part 2: Bear Spread
C) Consider selling a call option with a strike of $30 and buying a call option with a strike of $40. Fill in the table for the payoffs of the bear spread.

D) Plot the graph of the stock price (x-axis) vs. the total payoff (y-axis) for the bear spread. Label the axes and chart title.

Part 3: Box Spread
E) Consider buying a call option with a strike of $30 and selling a put option with a strike of $40. Consider buying a put option with a strike of $30 and selling a call option with a strike of $40.
Fill in the table for the payoffs of the box spread.

F) Plot the graph of the stock price (x-axis) vs. the total payoff (y-axis) for the box. Label the axes and chart title.

Part 4: Straddle
G) Consider buying a call and a put option, both with a strike price of $30 and the same expiration. Fill in the table for the payoffs of the straddle.

H) Plot the graph of the stock price (x-axis) vs. the total payoff (y-axis) for the straddle. Label the axes and chart title.

In the report, for each option strategy:
1) Describe the relation between the payoff and st.ock price

2) Describe why the strategy would be undertaken.

3) Under what circumstances will the strategy have a beneficial payoff.

Attachment:- Assignment-.rar

Reference no: EM131307454

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