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This information is a description of a spread consisting of the following: (1) a long call with exercise price K1, (2) a short put with

This information is a description of a spread consisting of the following: (1) a long call with exercise price K1, (2) a short put with exercise price K1, (3) a long put with exercise price K2, and (4) a short call with exercise price K2. K2 is greater than K1.

1.Draw a graph the shows the profits from the options listed above.

 

2. Show the payout at all possible price ranges for the underlying security of the spread described.

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1 Payoff Graph for the Spread This spread is called a collar or protective put spread Heres the payoff graph Xaxis Underlying security price increases from left to right Yaxis Profit increases upwards ... blur-text-image

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