Unformatted text preview: Question-3 A one-year European call option on one share of Dot.com with an exercise price of $50 is currently trading at $10, and a one-year European put option on one share of Dot.com with an exercise price of $50 is currently trading also at $10. Fill the tables below for the profit of the following portfolios as a function of the stock price at maturity. a) Buy one call and one put option (a long straddle). b) Sell one call and one put option (a short straddle). Question-4 Draw on a graph the value of the following portfolios ( Portf T ) at maturity as a function of the price of the underlying stock ( S T ). 1) Buy a call option with strike price K C and a put option with strike price K P such that K P > K C . 2) Buy a share of the stock and sell a call option with the same strike price K ....
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This note was uploaded on 12/10/2011 for the course MGCR 341 taught by Professor Trainor during the Winter '08 term at McGill.
- Winter '08