A speculator bought a sale option with a price of 60 TL at a premium of...

A speculator bought a sale option with a price of 60 TL at a premium of 3 TL, and sold the sale option at a price of 66 TL with a premium of 4 TL at the same time. What strategy did the speculator implement for what purpose? Show the profit and loss situation of the strategy on the chart.

Expert Solution

The straterfy is called bullishh Put where one put option with the higher strike price is sold and another put option with lesser strike price is purchased. The investor expect a slight increase in the share price.

Payoff from Buy of Sale Option (Long Put) = {(Strike Price - Stock Price) or 0 whichever higher } - Premium Paid

Payoff from purchase of Sale Option (Short Put) = Premium Received - {(Strike Price - Stock Price) or 0 whichever higher }

The calculations are shown in the pic.

jeff jeffy answered 1 year ago

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