Consider the following strategy: Long in April $110 put, premium = $2.50 and long in April $115 call, premium = $2.75. What type of strategy
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Consider the following strategy: Long in April $110 put, premium = $2.50 and long in April $115 call, premium = $2.75.
- What type of strategy is this and what price expectations does it suggest? Is it similar to any other combination strategy?
- Evaluate the payoff for 100 share contracts if the prices at maturity are $95 and $130.
- Diagram the payoff profile for the strategy. Label the break-even prices (including premia).
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