Question

You simultaneously write a put and buy a call, both with strike prices of $50, naked, i.e., without any position in the underlying stock. What are the expiration date payoffs to this position for stock prices of $40, $45, $50, $55, and $60? (Negative amounts should be indicated by a minus sign. Leave no cells blank- be certain to enter "0" wherever required. Omit the "S" sign in your response.) Stock Call Payoff Total Payof Price $40 $ $45 $ $50 $ $55 $ Put Payoff $60 $

Answer 1

Call payoff = (stock price - strike price)

Put payoff = (strike price - stock price)

Stock price	Put payoff $	Call payoff $	Total payoff $
$40	=(50-40)=10	=(40-50)=-10	10-10=0
$45	=(50-45)=5	=(45-50)=-5	5-5=0
$50	=(50-50)=0	=(50-50)=0	0+0=0
$55	=(50-55)=-5	=(55-50)=5	-5+5=0
$60	=(50-60)=-10	=(60-50)=10	-10+10=0

Answer 2

ANSWER :

1.

Strike price for both put and call positions = $50.

Profit dollar per share 

= Gain on put sold + Gain on call bought.  (On expiration) 

(Values in $ per share)

 Position             Wrote           Bought 

Stock price.    Put payoff       Call payoff        Total Payoff

40                   (40 - 50)          (40 < 50)

                         = - 10                = 0                     - 10 

45                   (45 - 50)          (45 < 50)      

                         = - 5                 =  0                       - 5

50                   (50 - 50)          (50 - 50)    

                         = 0                   = 0                          0

55                   (55 - 50)          (55 - 50)

                         = 5                    = 5                        10

60                   (60 - 50)          (60 - 50)               

                         = 10                  = 10                      20