SP5 September 2022 Q7i & ii

J

Jenil Mehta

Keen member
Hi,

I guess there is some error in the IFOA solution for part (i) of the above mentioned question.

Strike Price is 100.

Sell Call:
St 90: -max(90-100,0)+3.40 = 3.4
St 100: -max(100-100,0)+3.40 = 3.4
St 110: -max(110-100,0)+3.40 = -10+3.4 = -6.60

Sell Put
St 90: -max(100-90,0)+3.05 = -6.95
St 100: -max(100-100,0)+3.05 = 3.05
St 110: -max(100-110,0)+3.05 = 3.05

Total Profit:
St 90 = 3.4-6.95 = -3.55
St 100 = 3.4+3.05 = 6.45
St 110 = -6.60+3.05 = 3.55


And I was not able to comprehend part ii.
Could you please explain it to me.
 
Jenil Mehta said:
Hi,

I guess there is some error in the IFOA solution for part (i) of the above mentioned question.

Strike Price is 100.

Sell Call:
St 90: -max(90-100,0)+3.40 = 3.4
St 100: -max(100-100,0)+3.40 = 3.4
St 110: -max(110-100,0)+3.40 = -10+3.4 = -6.60

Sell Put
St 90: -max(100-90,0)+3.05 = -6.95
St 100: -max(100-100,0)+3.05 = 3.05
St 110: -max(100-110,0)+3.05 = 3.05

Total Profit:
St 90 = 3.4-6.95 = -3.55
St 100 = 3.4+3.05 = 6.45
St 110 = -6.60+3.05 = 3.55


And I was not able to comprehend part ii.
Could you please explain it to me.
Click to expand...
have understood it.
 
OK - good news. SP5 Sept 2022, Q7 looks like a completely different question to me. You may have noted the year wrong.
 
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