Chapter 13 - Call Option Payoff Patterns Time 0 Time T Put...

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Unformatted text preview: Call Option Payoff Patterns Time 0 Time T Put Option Payoff Patterns Time 0 Time T Purchase call option, cash flow < 0 Terminal call payoff, Max[S T- X,0] > Cash flows of call buyer Between times 0 and T: Cash flow = 0 for European option Cash flow > 0 for American option Write (I.e., issue) call option, cash flow > 0 Pay terminal call payoff = - Max[S T- X, 0] < Cash flows of call writer Between times 0 and T: Cash flow = 0 for European option Cash flow < 0 for American option Purchase put option, cash flow < 0 Terminal put payoff, Max[X - S T ,0] > Cash flows of put buyer Between times 0 and T: Cash flow = 0 for European option Cash flow > 0 for American option Write (I.e., issue) call option, cash flow > 0 Pay terminal call payoff = - Max[X - S T , 0] < Cash flows of put writer Between times 0 and T: Cash flow = 0 for European option Cash flow < 0 for American option Page 238-241 Page 2 Profit Patterns from GP Stock and Options Initial GP stock price 40 Terminal GP stock price 70 Profit from bought stock 30 <-- =B4-B3 Profit from shorted stock-30 <-- =-B4+B3 Call exercise price...
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Chapter 13 - Call Option Payoff Patterns Time 0 Time T Put...

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