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An investor believes that the share price of share ABC will be 130 in one year. He assesses either buy a long butterfly or a
An investor believes that the share price of share ABC will be 130 in one year. He assesses either buy a long butterfly or a short straddle. A long butterfly consists of a long call option with an exercise price of K1, 2 short call options with exercise price K2 and a long call option with exercise price K3, K2 = {(K1 + K3) the and all options have the same expiration date. A long straddle is a long call option and a long put option with the same exercise price K and due date. a) Briefly discuss differences and similarities between the two strategies (long butterfly, short straddle) based on the investor's perception of the market. The default notation is used, and the following parameter values are given: S0 = 120, o = 0,30, 8 = 0, r = 0,02, og T = 0,75. In addition, K1 = 110, K3 = 150 and K = K2. An investor believes that the share price of share ABC will be 130 in one year. He assesses either buy a long butterfly or a short straddle. A long butterfly consists of a long call option with an exercise price of K1, 2 short call options with exercise price K2 and a long call option with exercise price K3, K2 = {(K1 + K3) the and all options have the same expiration date. A long straddle is a long call option and a long put option with the same exercise price K and due date. a) Briefly discuss differences and similarities between the two strategies (long butterfly, short straddle) based on the investor's perception of the market. The default notation is used, and the following parameter values are given: S0 = 120, o = 0,30, 8 = 0, r = 0,02, og T = 0,75. In addition, K1 = 110, K3 = 150 and K = K2
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