Construct a payoff table for strategy

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You wish to construct a protective collar on the Astra Zeneca Corporation (AZN) stock (1 long stock of AZN, 1 long put, 1 short call). You own 100 shares of the stock. The AZN stock currently trades for $55 per share. You buy 100 put options on this stock with the strike price of $50 and sells 100 call options with the strike price of $60. Both options expire in 6 months. The annual volatility of returns on AZN is 23%. The risk free rate is 2% per annum.

a. Construct a payoff table for this strategy

b. Show on the graph how the payoff of this strategy depends on the price of the AZN stock

c. In your opinion, what is the purpose of this strategy?

Reference no: EM133111942

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