Question
A trader buys a put option with strike $85 and buys a call option with a strike of $95, both with the same maturity T,
A trader buys a put option with strike $85 and buys a call option with a strike of $95, both with the same maturity T, with 2 months to expiration. The call option trades at $4 and the put option trades at $4.50. The current share price is $90. Assuming the trader holds this until maturity, to time T, draw a diagram of the final payoff profile This diagram requires that you label axes, and note the breakeven share prices on an axis, the strikes, as well as note the maximum loss level on an axis. The position is a type of option combination, what is this type of combination called? Is the traders overall position long or short volatility?
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