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Suppose that the temperature for each day in December was 65 degree high and 25 degree low. What is the payoff from a call option
Suppose that the temperature for each day in December was 65 degree high and 25 degree low. What is the payoff from a call option on the cumulative HDD during December with a strike 420 and a payment rate of $5,000 per HDD? A trader has the following portfolio: Long June CDDs in JFK (NY) at 400, Short June CDDs in LGA (NY) at 480. Both are swaps. Assume that due to construction, High Temperatures in LGA were 1 degree higher than in JFK for each day in June, while Low temperatures were the same. Also, each day in a month had a number of CDDs greater than five. If each CDD $5,000, what is Trader's P&L from combined position at the end of June? O A $250,000 0 $325,000 0 $400,000 D Not enough information
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