Suppose that you are convinced that this stock is not as volatile as the market believes it to be, but are unsure of the direction of future price movements. Construct a suitable portfolio to match your beliefs, and plot the payoff diagram (you may assume a zero risk-free rate).

 

One of the more complex options strategies is the so-called "iron condor" portfolio, using a combinations of long and short positions, call and put options, and four different strike prices. In this question we will consider what would motivate traders to construct such a portfolio and the structure of the payoffs that they receive from it. Suppose that stock in Hieroglyph Inc. is currently priced at St = 150 per share, with prices of various options written on this stock given below. Strike Call Price Put Price 120 140 160 180 35 20 10 5 5 10 20 35