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The current price for a stock index is 1,000 . The following premiums exist for various options to buy or sell this stock index six
The current price for a stock index is 1,000 . The following premiums exist for various options to buy or sell this stock index six months from now: Strategy I is to buy the 1,050 -strike call and to sell the 950 -strike call Strategy II is to buy the 1,050-strike put and to sell the 950-strike put Strategy III is to buy the 950-strike call and to sell the 1,050-strike call Assume that the price of the stock index in 6 months will be between 950 and 1,050. Determine which, if any, of the three strategies will have greater payoffs in six months for lower prices of the stock index than for relatively higher prices. Select one alternative: III only. I and II only, I and III only. II and III only
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