Petra buys a call option ( strike price 3 5 0 0 ) for 1 5 0 She buys a call option with strike price 2 5 0 0 for 2 2 0 and sells two call options with a strike price of 3 0 0 0 for 1 8 0 All the options have the same expiry ( i ) Draw a profit diagram for Petra s portfolio ( ii ) Calculate the pay off if the asset value at maturity is ( a ) 4 0 , ( b ) 3 1 , ( c ) 2 7 ( iii ) Why might someone buy such a portfolio ( iv ) What is the name given to such a portfolio

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Petra buys a call option ( strike price = 3 5 . 0 0 ) for 1 . 5 0 . She buys a call

Petra buys a call option

(

strike price

= 35.00)

for

1.50 .

She buys a call

option with strike price

25.00

for

2.20

and sells two call options with a

strike price of

30.00

for

1.80 .

All the options have the same expiry.

(

)

Draw a profit diagram for Petra

s portfolio.

(

)

Calculate the pay

-

off if the asset value at maturity is

(

) 40, (

) 31,

(

) 27 .

(

iii

)

Why might someone buy such a portfolio?

(

)

What is the name given to such a portfolio?

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