European call contracts and one xer ox european put contract

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Reference no: EM131825389

Mr. Chang bought two Xerox European call contracts and one Xer ox European put contract, both of which expire in three months. Each contract is for 100 options. The exercise price of each call is $70, and the exercise price of each put is $75.

a. What is the payoff of Mr. Chang’s position at expiration if the market price of Xerox stock on the expiration date is $65? What if the market price is $72? What if the market price is $80?

b. Draw Mr. Chang’s payoff diagram with respect to the stock price at expiration.

Reference no: EM131825389

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