Solution-Draw the position diagram and explain what it means

Draw the position diagram and explain what it means

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Reference no: EM133002415

Question -

a) Suppose you are a speculator. You own a portfolio that consists of a short position on a European call option on a share.

Required - Sketch the position diagram and explain what it means. Show all the key points on the diagram. Assume no dividends are paid by the share.

b) John is a speculator. He owns a portfolio that consists of a European call option and a European put option on the same share. Suppose the two options have the same expiry date and the same strike price;

Required - I. Draw the position diagram and explain what it means.

II. Use the diagram in part 1 to explain John's opinions about future share prices.

Reference no: EM133002415

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Draw the position diagram and explain what it means

Reference no: EM133002415

Reference no: EM133002415

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