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Company A with 3 months to maturity, a trader sketched the following two payoff diagrams as the building block of his trade. From your understanding
Company A with 3 months to maturity, a trader sketched the following two payoff diagrams as the building block of his trade. From your understanding of the mechanics of option trading, (i) carefully explain the payoff diagrams constructed by the trader and the traders overall portfolio position, (ii) construct the Profit & Loss table at maturity for the traders portfolio.
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