Question
Suppose you wrote a 180 -day call option on General Motors stock with an exercise price $50, and also bought a put with an exercise
Suppose you wrote a 180 -day call option on General Motors stock with an exercise price $50, and also bought a put with an exercise price of $45 on the same stock with the same expiration date . Both are European options . Draw the payoff diagram with the stock price on the X-axis and the total payoff(from both options)on the expiration date on the Y axis . What must be your expectations about General Motors stock that would cause you to pursue the above strategy? Draw the payoff diagram below. Be sure to place the correct dollar amount at every important point on the diagram. Briefly describe your expectations for GM right below the diagram.
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