How aggressive bear spread can be created using put option

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Reference no: EM131237177

1. Explain how an aggressive bear spread can be created using put options.

2. Suppose that put options on a stock with strike prices $30 and $35 cost $4 and $7, respectively. How can the options be used to create (a) a bull spread and (b) a bear spread? Construct a table that shows the profit and payoff for both spreads.

3. Use put-call parity to show that the cost of a butterfly spread created from European puts is identical to the cost of a butterfly spread created from European calls.

Reference no: EM131237177

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