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Exercise 1.5. Which of the following is a way to profit from a falling price of a stock: buying the stock, short-selling the stock, buying
Exercise 1.5. Which of the following is a way to profit from a falling price of a stock: buying the stock, short-selling the stock, buying a call on the stock, selling a call on the stock, buying a put on the stock, selling a put on the stock? Point out what is potential risk (limited / large) and reward in each case. Exercise 1.6. Plot the payoff of the butterfly spread: 1 long call with strike E1 = 90, 1 long call with strike E3 = 110 and 2 short calls with strike E2 = 100
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