Create a portfolio consisting of a short call stock option with exercise price $59 and a long put stock option with exercise price $50

Finance Mar 05, 2022

Create a portfolio consisting of a short call stock option with exercise price $59 and a long put stock option with exercise price $50. Both options have the same underlying and time to maturity. The put option cost $2.80 and the call option costs $4.20.

(a) (3 points) Calculate the profit function of your portfolio.

(b) (3 points) Sketch the profit function of the strategy as well as the individual components