Question

Draw the payoff diagram for owning (buying) a call and a put option with same strike price X.

Answer 1

					Assume Strike Price X=	$100
					Buying a Call=Long call
					If The price at expiration is higher than X($100)
					There will be payoff =(Price at expiration )-100
					If the price at expiration is lower than or equal to X($100)
					Payoff =$0
					Buying a Put=Long Put
					If The price at expiration is Lower than X($100)
					There will be payoff =100-(Price at expiration )
					If the price at expiration is higher than or equalto X($100)
					Payoff =$0
					STRIKE PRICE=X=$100	A	B	C
	Price at Expiration	Payoff			Price at Expiration	Payoff of Long Call	Payoff Long Put	TotalPayoff
	$90	$10			$90	$0	$10	$10
	$91	$9			$91	$0	$9	$9
	$92	$8			$92	$0	$8	$8
	$93	$7			$93	$0	$7	$7
	$94	$6			$94	$0	$6	$6
	$95	$5			$95	$0	$5	$5
	$96	$4			$96	$0	$4	$4
	$97	$3			$97	$0	$3	$3
	$98	$2			$98	$0	$2	$2
	$99	$1			$99	$0	$1	$1
	$100	$0			$100	$0	$0	$0
	$101	$1			$101	$1	$0	$1
	$102	$2			$102	$2	$0	$2
	$103	$3			$103	$3	$0	$3
	$104	$4			$104	$4	$0	$4
	$105	$5			$105	$5	$0	$5
	$106	$6			$106	$6	$0	$6
	$107	$7			$107	$7	$0	$7
	$108	$8			$108	$8	$0	$8
	$109	$9			$109	$9	$0	$9
	$110	$10			$110	$10	$0	$10