Question

Port. 4. What follows are several portfolios; each is denoted by the term Graph the profit curve at t = T for each of them. Determine the strengths and weaknesses of each portfolio. Namely, explain what a reasonable investor must be expecting to adopt each portfolio. In this listing, CE denotes a call with strike price E, -CE represents where a person is short on a call the Call was sold, Pe is a put, -PE is selling, or going short on a put, and the numbers E indicate the strike price. If no number is given, then assume that the strike price is $100. (a) A "Long Call" is Port C (b) A "Short Call" is Port--CE (c) A "Long Put" is Port = PE. (d) A "Short Put" is Port P. (e) A "Long Straddle" is Port = PE +CE; namely, buy both a Put and Call with the same strike price. (f) A "Short Straddle" is Port--P-C. (g) A "Long Strangle" is Port- PECa; namely, it is a purchase of a put at strike price E1, which is less than the strike price of a call at E2 (h) a "Short butterfly" is Port CE+2Ca-CEs where E (i) A "Long butterfly" is Port-CE1-2CE2 +CE.) where El < (j) A "Sh 1 + CB2 + CE3-CE4 where (k) A "Long Condor" is Port CE-Ca-CaCE ort Condor" is Port =-CE

Answer 1

I have answered the First four parts, in the following images: