spread strategy payoff

madhuri1682
Good Student
Posts: 29
Joined: Thu Oct 04, 2012 2:09 am

spread strategy payoff

Postby madhuri1682 » Fri Nov 09, 2012 6:00 pm

An investor purchases a call on a stock, with an exercise price of $60 and a premium of $2, and purchases a put option with the same maturity that has an exercise price of $65 and a premium of $1. Compute the payoff of a strangle strategy if the stock is at $63
Choose one answer.
a. $ 4
b. $2
c. - $1
d. -$3

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swarnendupathak
Finance Junkie
Posts: 119
Joined: Mon Sep 17, 2012 11:06 am

Re: spread strategy payoff

Postby swarnendupathak » Fri Nov 09, 2012 9:41 pm

for PUT it should be 2 & CALL to be 3, so payoff to be 5 & P&L to be 5-3 = 2.
Think answer is wrong

Swarnendu

madhuri1682
Good Student
Posts: 29
Joined: Thu Oct 04, 2012 2:09 am

Re: spread strategy payoff

Postby madhuri1682 » Sat Nov 10, 2012 3:44 pm

thanks. even i got the same ans as u.

content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: spread strategy payoff

Postby content.pristine » Mon Nov 12, 2012 12:44 pm

You both are right.
The answer is 2
8-)


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