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(a) Please fill in the following profit table for bull call spread. Suppose that the premium for the call option with the strike price K
(a) Please fill in the following profit table for bull call spread. Suppose that the premium for the call option with the strike price K is C1, and the premium for the call option with the strike price K2 is c2. Profit Short Call, Strike K2 Bull Spread 1 Ky K2 ST Long Call, Strike Ky Profit of Long Call at K Profit of Short Call at K2 Total Profit If STK1 Ki K2 (b) Please fill in the following profit table for bull put spread. Suppose that the premium for the put option with the strike price K is p1, and the premium for the put option with the strike price K2 is p2. Profit Short Put, Strike K2 Bull Spread K ST Long Put, Strike Ky Profit of Long Put at K Profit of Short Put at K2 Total Profit If ST K2 (c) Are the total profits from (a) and (b) equal? If so, can you prove it using the put-call parity without consideration of time value of money (c+K=p+So)? (a) Please fill in the following profit table for bull call spread. Suppose that the premium for the call option with the strike price K is C1, and the premium for the call option with the strike price K2 is c2. Profit Short Call, Strike K2 Bull Spread 1 Ky K2 ST Long Call, Strike Ky Profit of Long Call at K Profit of Short Call at K2 Total Profit If STK1 Ki K2 (b) Please fill in the following profit table for bull put spread. Suppose that the premium for the put option with the strike price K is p1, and the premium for the put option with the strike price K2 is p2. Profit Short Put, Strike K2 Bull Spread K ST Long Put, Strike Ky Profit of Long Put at K Profit of Short Put at K2 Total Profit If ST K2 (c) Are the total profits from (a) and (b) equal? If so, can you prove it using the put-call parity without consideration of time value of money (c+K=p+So)
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