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Synthetic Options: Draw the payo (including the premiums paid/received) diagram for following strategies: Let us assume a trader thinks that the underlying security, STOCK, will
Synthetic Options: Draw the payo (including the premiums paid/received) diagram for following strategies:
Let us assume a trader thinks that the underlying security, STOCK, will not rise or fall much by expiration. Let us say the share price of STOCK is $100 today. The trader buys a put option on STOCK with strike price $90 at a premium of $15 and buys a put option on STOCK with strike price $110 at a premium of $45. In addition, the trader sells two put options on STOCK with strike price $100 at a premium of $25 each.
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