I just got my X3 assignment back from marking and I disagree with one of the answers in Q3.2(vi) Option strategy 2 involves buying a call option with strike X and selling two put options with strike X. The marking schedule gives this as being a Strip, with the corresponding payoff diagram. However, would the strip not be buying a call option with strike X and buying two put options with strike X? I think the answer should be a payoff diagram which is steeply negative for P<X and more shallowly positive for P>X (ignoring premiums). No idea what this would be called, or whether it's a real trading strategy or not. Does anyone else agree?
mistake I certainly agree. The markers should have been told to indicate that it is a typo. There are "corrections" for this one on the Acted website. Sorry - hope you didnt waste too much time trying to think this one through
