Put option on same stock with the same time to expiration

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Reference no: EM131825195

Suppose you own a call option with an exercise price of $50, and you also own a put option on the same stock with the same time to expiration with an exercise price of $45. a. Draw the payoff diagram for the call option on the expiration date. (Hint: Consider the payoffs from the option in the following three stock price ranges: (i) stock price greater than $50, (ii) stock price less than $50, and (iii) stock price equal to $50.) b.Draw the payoff diagram for the put option on the expiration date. (Hint: Consider the payoffs from the option in the following three stock price ranges: (i) stock price greater than $45, (ii) stock price less than $45, and (iii) stock price equal to $45.) c.Draw the payoff diagram for the payoff on the expiration date on a portfolio made up of one call and one put option. (Hint: Consider the payoffs from the portfolio in the following three stock price ranges: (i) stock price greater than $50, (ii) stock price less than $45, and (iii) stock price between $45 and $50.)

Reference no: EM131825195

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