Consider the following investments An investor short sells a stock at a price S, and writes an at the money call option on the same stock with a strike price of K An investor buys one put with a strike price of K1 and one call option at a strike price of K2 with K1 K2 An investor buys one put and w...

a The following plots show the respective payoff diagrams at expira ...

Consider the following investments: An investor short sells a stock at a price S, and writes

Question:

Consider the following investments:
• An investor short sells a stock at a price S, and writes an at-the-money call option on the same stock with a of K.
• An investor buys one put with a of K1 and one call option at a of K2 with K1 ≤ K2.
• An investor buys one put and writes one call with K1, and buys one call and writes one put with K2 (K1 ≤ K2).
(a) Plot the expiration payoff diagrams in each case.
(b) How would these diagrams look some time before expiration? Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.