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You have purchased 1 European Call option and 1 European Put option on stock ABC for $2 and $1 respectively. The strike/exercise prices of both
You have purchased 1 European Call option and 1 European Put option on stock ABC for $2 and $1 respectively. The strike/exercise prices of both the options purchased is equal to $50. These options are set to expire on the third Friday of June 2014. The possible values for the price of the stock ABC on the 3rd Friday of June 2014 are $50 with 30% chance, $30 with 30% chance and $70 with 40% chance. Compute the expected return for your portfolio of 1 European Call option and 1 European Put option.
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