Question $1$

Draw the payoff diagrams of the following options combinations $($between price range of $40-120).$

a$)$ Option Type

Put

Strike

Position

Call

$50$

Long $1$

$80$

Long $1$

You are long $1$ put option with $K=50$ and long $1$ call option with $k=80$

b$)$ Option Type

Put

Strike

$60$

$80$

$100$

$I^{100}$

Position

Call

Short $1$

Call

Long $1$

Long $1$

Cash $40$

Besides you have $40$ in cash, you are short $1$ put option with $K=60,$ Long $1$ call options with $k=80$ and Long $1$ call option with $k=100.$