Question

You are long 3 contracts of 1-yr futures on the S&P 500 index with delivery price of $3,00, long 3 contracts of 1-yr put options on the index with strike of $2,400, and also short 3 contracts of 1-yr call options on the index with strike of $4,000. What will be your payoff at expiry if the index price (S_T) is $1,000?

You are long 3 contracts of 1-yr futures on the S&P 500 index with delivery price of $3,00, long 3 contracts of 1-yr put options on the index with strike of $2,400, and also short 3 contracts of 1-yr call options on the index with strike of $4,000. What will be your payoff at expiry if the index price (S_T) is $2,000?

You are long 3 contracts of 1-yr futures on the S&P 500 index with delivery price of $3,00, long 3 contracts of 1-yr put options on the index with strike of $2,400, and also short 3 contracts of 1-yr call options on the index with strike of $4,000. What will be your payoff at expiry if the index price (S_T) is $3,000?

You are long 3 contracts of 1-yr futures on the S&P 500 index with delivery price of $3,00, long 3 contracts of 1-yr put options on the index with strike of $2,400, and also short 3 contracts of 1-yr call options on the index with strike of $4,000. What will be your payoff at expiry if the index price (S_T) is $5,000?

You are long 3 contracts of 1-yr futures on the S&P 500 index with delivery price of $3,00, long 3 contracts of 1-yr put options on the index with strike of $2,400, and also short 3 contracts of 1-yr call options on the index with strike of $4,000. What will be your payoff at expiry if the index price (S_T) is $4,000?

Answer 1

at expiry if the index price (S_T) is $1,000

Long 3 contract of 1 yr Future , Pay off = (Spot on expiry- Buying price)* Contract i.e.(1000-300)*3 or $2100

Long 3 contract of 1 yr put option at strike of 2400, Pay off = (Strike Price- Spot on expiry)* Contract

= (2400-1000)*3 or $4200

Short 3 Contract of 1 yr call at strike 4000, Pay off is 0 Since price is less then strike price.

Total Pay off = Sum of above i.e. 2100+4200+0 i.e.$6300

at expiry if the index price (S_T) is $2,000

Long 3 contract of 1 yr Future , Pay off = (Spot on expiry- Buying price)* Contract i.e.(2000-300)*3 or $5100

Long 3 contract of 1 yr put option at strike of 2400, Pay off = (Strike Price- Spot on expiry)* Contract

= (2400-2000)*3 or $1200

Short 3 Contract of 1 yr call at strike 4000, Pay off is 0 Since price is less then strike price.

Total Pay off = Sum of above i.e. 5100+1200+0 i.e.$6300

at expiry if the index price (S_T) is $3,000

Long 3 contract of 1 yr Future , Pay off = (Spot on expiry- Buying price)* Contract i.e.(3000-300)*3 or $8100

Long 3 contract of 1 yr put option at strike of 2400, Pay off is 0 since price is more then Strike price

Short 3 Contract of 1 yr call at strike 4000, Pay off is 0 Since price is less then strike price.

Total Pay off = Sum of above i.e. 8100+0+0 i.e.$8100

at expiry if the index price (S_T) is $5,000

Long 3 contract of 1 yr Future , Pay off = (Spot on expiry- Buying price)* Contract i.e.(5000-300)*3 or $14100

Long 3 contract of 1 yr put option at strike of 2400, Pay off is 0 since price is more then Strike price

Short 3 Contract of 1 yr call at strike 4000, Pay off = (4000-5000).*3 i.e. -$ 3000

Total Pay off = Sum of above i.e. 14100+0-3000 i.e.$11100

at expiry if the index price (S_T) is $4,000

Long 3 contract of 1 yr Future , Pay off = (Spot on expiry- Buying price)* Contract i.e.(4000-300)*3 or $11100

Long 3 contract of 1 yr put option at strike of 2400, Pay off is 0 since price is more then Strike price

Short 3 Contract of 1 yr call at strike 4000, Pay off = (4000-4000).*3 i.e 0

Total Pay off = Sum of above i.e. 11100+0-0 i.e.$11100