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Plot the payoff of each option

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Reference no: EM133117230

Question - Assume that you bought two put options with a strike price K1 of £50 and you bought one call option with a strike price K2 of £50.

i) First plot the payoff of each option (i.e., the two put options held long with a strike price of £50 and the one call option held long with the same strike price) at maturity against the value of the underlying asset7 also at maturity. Finally, combine (i.e., add up) the payoffs.

ii) What is this strategy called? Why would you invest into such strategy?

Reference no: EM133117230

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