Maximum and minimum net payoffs and break even points

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Reference no: EM132007679

1-Suppose an investor performs the following: Buys 2 call options with strike price K=25 for $2.5 for each call option, expiring in 1 month. Buys a put option with strike price K=25 for $2, expiring in 1 month. Draw the net payoff diagram showing clearly on the graph the different break-even values. Clearly marking the strike prices, maximum and minimum net payoffs and Break even points.

2-An investor buys a put option with a strike $35 for $5; sells a put option with strike $40 for $10, sells a call option with strike $50 for $11 and buys another call with strike $55 for $6. All the 4 contracts are on the same underlying stock and all of them mature at the same time. The call and put options are European. Draw the net payoff diagram for this strategy, clearly marking the strike prices, maximum and minimum net payoffs and Breakeven points.

Reference no: EM132007679

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