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Suppose that you traded the following options on Facebooks stock: a. Sold 1 call option with an exercise price of $250 at the price of
Suppose that you traded the following options on Facebooks stock:
a. Sold 1 call option with an exercise price of $250 at the price of $40;
b. Sold 1 put option with an exercise price of $250 at the price of $30; and
c. Bought 1 call option with an exercise price of $300 at the price of $22.
Also, suppose that:
i. All options are European;
ii. The options expire one year from now; and
iii. As usual, each option gives the right to buy (sell) 1 share.
Construct a table with the payoffs and profits (one year from now) for your combined position. Draw the profit diagram.
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