Question

In: Finance

Construct a profit and loss diagram (chart) for an Iron Condor on Netflix. This strategy consists...

  1. Construct a profit and loss diagram (chart) for an Iron Condor on Netflix. This strategy consists of selling one call spread and one put spread (same expiration day). I would like to see the diagram for a stock price of $310 to $410 in $1 increments.
  • Sell 1 Netflix call with a strike price of 365 and an option premium of $21.16
  • Buy 1 Netflix call with a strike price of 375 and an option premium of $17.08
  • Sell 1 Netflix put with a strike price of  355 and an option premium of $15.00
  • Buy 1 Netflix put with a strike price of  345 and an option premium of $11.40

Solutions

Expert Solution

The profits from long and short positions in call and put options where St is the Stock price at maturity and K is the strike price is given by

Profit from a long call = max(St-K, 0) - Premium

Profit from a Short call = Premium - max(St-K, 0)

Profit from a long put = max(K-St, 0) - Premium

Profit from a short put = Premium - max(K-St, 0)

So, the total profit and loss is the sum of all the four options profit and loss

the profit and loss table as well as chart are as shown below

Iron Condor profit and loss
Stock price at Profit and Loss Total Profit/Loss
Expiration Short 365 call Long 375 call Short 355 put Long 345 put
310 21.16 -17.08 -30 23.6 -2.32
311 21.16 -17.08 -29 22.6 -2.32
312 21.16 -17.08 -28 21.6 -2.32
313 21.16 -17.08 -27 20.6 -2.32
314 21.16 -17.08 -26 19.6 -2.32
315 21.16 -17.08 -25 18.6 -2.32
316 21.16 -17.08 -24 17.6 -2.32
317 21.16 -17.08 -23 16.6 -2.32
318 21.16 -17.08 -22 15.6 -2.32
319 21.16 -17.08 -21 14.6 -2.32
320 21.16 -17.08 -20 13.6 -2.32
321 21.16 -17.08 -19 12.6 -2.32
322 21.16 -17.08 -18 11.6 -2.32
323 21.16 -17.08 -17 10.6 -2.32
324 21.16 -17.08 -16 9.6 -2.32
325 21.16 -17.08 -15 8.6 -2.32
326 21.16 -17.08 -14 7.6 -2.32
327 21.16 -17.08 -13 6.6 -2.32
328 21.16 -17.08 -12 5.6 -2.32
329 21.16 -17.08 -11 4.6 -2.32
330 21.16 -17.08 -10 3.6 -2.32
331 21.16 -17.08 -9 2.6 -2.32
332 21.16 -17.08 -8 1.6 -2.32
333 21.16 -17.08 -7 0.6 -2.32
334 21.16 -17.08 -6 -0.4 -2.32
335 21.16 -17.08 -5 -1.4 -2.32
336 21.16 -17.08 -4 -2.4 -2.32
337 21.16 -17.08 -3 -3.4 -2.32
338 21.16 -17.08 -2 -4.4 -2.32
339 21.16 -17.08 -1 -5.4 -2.32
340 21.16 -17.08 0 -6.4 -2.32
341 21.16 -17.08 1 -7.4 -2.32
342 21.16 -17.08 2 -8.4 -2.32
343 21.16 -17.08 3 -9.4 -2.32
344 21.16 -17.08 4 -10.4 -2.32
345 21.16 -17.08 5 -11.4 -2.32
346 21.16 -17.08 6 -11.4 -1.32
347 21.16 -17.08 7 -11.4 -0.32
348 21.16 -17.08 8 -11.4 0.68
349 21.16 -17.08 9 -11.4 1.68
350 21.16 -17.08 10 -11.4 2.68
351 21.16 -17.08 11 -11.4 3.68
352 21.16 -17.08 12 -11.4 4.68
353 21.16 -17.08 13 -11.4 5.68
354 21.16 -17.08 14 -11.4 6.68
355 21.16 -17.08 15 -11.4 7.68
356 21.16 -17.08 15 -11.4 7.68
357 21.16 -17.08 15 -11.4 7.68
358 21.16 -17.08 15 -11.4 7.68
359 21.16 -17.08 15 -11.4 7.68
360 21.16 -17.08 15 -11.4 7.68
361 21.16 -17.08 15 -11.4 7.68
362 21.16 -17.08 15 -11.4 7.68
363 21.16 -17.08 15 -11.4 7.68
364 21.16 -17.08 15 -11.4 7.68
365 21.16 -17.08 15 -11.4 7.68
366 20.16 -17.08 15 -11.4 6.68
367 19.16 -17.08 15 -11.4 5.68
368 18.16 -17.08 15 -11.4 4.68
369 17.16 -17.08 15 -11.4 3.68
370 16.16 -17.08 15 -11.4 2.68
371 15.16 -17.08 15 -11.4 1.68
372 14.16 -17.08 15 -11.4 0.68
373 13.16 -17.08 15 -11.4 -0.32
374 12.16 -17.08 15 -11.4 -1.32
375 11.16 -17.08 15 -11.4 -2.32
376 10.16 -16.08 15 -11.4 -2.32
377 9.16 -15.08 15 -11.4 -2.32
378 8.16 -14.08 15 -11.4 -2.32
379 7.16 -13.08 15 -11.4 -2.32
380 6.16 -12.08 15 -11.4 -2.32
381 5.16 -11.08 15 -11.4 -2.32
382 4.16 -10.08 15 -11.4 -2.32
383 3.16 -9.08 15 -11.4 -2.32
384 2.16 -8.08 15 -11.4 -2.32
385 1.16 -7.08 15 -11.4 -2.32
386 0.16 -6.08 15 -11.4 -2.32
387 -0.84 -5.08 15 -11.4 -2.32
388 -1.84 -4.08 15 -11.4 -2.32
389 -2.84 -3.08 15 -11.4 -2.32
390 -3.84 -2.08 15 -11.4 -2.32
391 -4.84 -1.08 15 -11.4 -2.32
392 -5.84 -0.08 15 -11.4 -2.32
393 -6.84 0.92 15 -11.4 -2.32
394 -7.84 1.92 15 -11.4 -2.32
395 -8.84 2.92 15 -11.4 -2.32
396 -9.84 3.92 15 -11.4 -2.32
397 -10.84 4.92 15 -11.4 -2.32
398 -11.84 5.92 15 -11.4 -2.32
399 -12.84 6.92 15 -11.4 -2.32
400 -13.84 7.92 15 -11.4 -2.32
401 -14.84 8.92 15 -11.4 -2.32
402 -15.84 9.92 15 -11.4 -2.32
403 -16.84 10.92 15 -11.4 -2.32
404 -17.84 11.92 15 -11.4 -2.32
405 -18.84 12.92 15 -11.4 -2.32
406 -19.84 13.92 15 -11.4 -2.32
407 -20.84 14.92 15 -11.4 -2.32
408 -21.84 15.92 15 -11.4 -2.32
409 -22.84 16.92 15 -11.4 -2.32
410 -23.84 17.92 15 -11.4 -2.32

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