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You possess a portfolio where you have: One share of stock, Current price $53 Bought 1 put option with expiry T and strike

You possess a portfolio where you have: • One share of stock, Current price $53 • Bought 1 put option with expiry T and strike price K = 55 • Sold 1 call option with expiry T and strike K = 55

(a) Suppose S(T) = 61, what will occur?

(b) Suppose S(T) = 50, what will occur?

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a If ST 61 the stock price is higher than the strike price of both the put and call options In this ... blur-text-image

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