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  • Session Seven: In-Class Exercise On Option Strategies

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    Mavis
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    The document discusses an in-class exercise on option strategies. It lists various option positions and asks students to draw rough profit diagrams and examine how the positions can be used. The positions include long and short calls and puts with varying strike prices. The document also includes two true/false statements about option pricing and profit diagrams of call and put combinations.

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    Session 07_Exercise

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    The document discusses an in-class exercise on option strategies. It lists various option positions and asks students to draw rough profit diagrams and examine how the positions can be used. The positions include long and short calls and puts with varying strike prices. The document also includes two true/false statements about option pricing and profit diagrams of call and put combinations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    4 views3 pages

    Session Seven: In-Class Exercise On Option Strategies

    Uploaded by

    Mavis
    The document discusses an in-class exercise on option strategies. It lists various option positions and asks students to draw rough profit diagrams and examine how the positions can be used. The positions include long and short calls and puts with varying strike prices. The document also includes two true/false statements about option pricing and profit diagrams of call and put combinations.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    MFIN6003 Derivative Securities Dr.

    Huiyan Qiu

    Session Seven: In-Class Exercise on Option Strategies d. short put with the same strike price

    Draw the rough profit diagram for the following position(s) and
    examine how they can be used:
    1. Long call and
    a. long put with the same strike price

    e. short put with the higher strike price

    b. long put with higher strike price


    f. short put with the lower strike price

    c. long put with lower strike price g. short call with higher strike price

    1
    MFIN6003 Derivative Securities Dr. Huiyan Qiu

    h. short call with lower strike price c. short call with lower strike price

    2. Long put and d. short put with higher strike price


    a. short call with the same strike price

    e. short put with lower strike price


    b. short call with higher strike price

    2
    MFIN6003 Derivative Securities Dr. Huiyan Qiu

    True or false:

     At-the-money call option is more expensive than at-the-money


    put if forward price is higher than the stock price.

     (Long K1-strike call + long K2-strike put) generates the same


    profit diagram as (Long K2-strike call + long K1-strike put)
    where K1 and K2 are different.

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