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We consider the following options strategy on TSLA and its total payoff at the expiry date of the short-term option. Option 1 2 3 Type
We consider the following options strategy on TSLA and its total payoff at the expiry date of the short-term option. Option 1 2 3 Type Call Call Call Position Short x 1 Long x3 Short x 2 Remaining Life 0 0.5 0 Strike 350 375 400 For the options with a remaining life, we use BSM model to determine their values. We assume a volatility of 20% and a risk-free rate of 4%. (a) Compute the total payoff for S = 350, 375 and 400. (2 marks) (b) Use Excel to draw the payoff pattern for prices between $150 and $770 with a step of $10.(3 marks) We consider the following options strategy on TSLA and its total payoff at the expiry date of the short-term option. Option 1 2 3 Type Call Call Call Position Short x 1 Long x3 Short x 2 Remaining Life 0 0.5 0 Strike 350 375 400 For the options with a remaining life, we use BSM model to determine their values. We assume a volatility of 20% and a risk-free rate of 4%. (a) Compute the total payoff for S = 350, 375 and 400. (2 marks) (b) Use Excel to draw the payoff pattern for prices between $150 and $770 with a step of $10
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