Based on the option chain below : T=0.3 per year and the option chain expires in
ID: 2820980 • Letter: B
Question
Based on the option chain below :
T=0.3 per year and the option chain expires in 110 days and there is no bid-ask spread.
For an asymmetric butterfly constructed using the given put options with the low strike at 58, the peak at 60 and the high strike at 64, how much would the strategy cost for one unit of the underlying asset?
A) 3.24
B) 0.39
C) 1.6
Calls
Strikes
Puts
8.83
56
2.00
7.53
58
2.68
6.36
60
3.50
5.32
62
4.45
4.41
64
5.53
3.63
66
6.73
Calls
Strikes
Puts
8.83
56
2.00
7.53
58
2.68
6.36
60
3.50
5.32
62
4.45
4.41
64
5.53
3.63
66
6.73
Explanation / Answer
The Butterfly strategy will be applied as follows;
Short two puts at strike price of 60.
long one puts at strike price of 58 and long another put at strike price of 64.
Hence Total inital cost of Gaining the positions is;
=2*3.50-2.68-5.53
= -1.21
Unfortunately None of given options matches.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.