Question

You are long 2 contracts of 1-yr call on MSFT with strike (K) of $220, and also long 2 contracts of 1-yr call on MSFT with strike (K) of $120. What will be your payoff if MSFT price at expiry (S_T) is $100?

You are long 2 contracts of 1-yr call on MSFT with strike (K) of $220, and also long 2 contracts of 1-yr call on MSFT with strike (K) of $120. What will be your payoff if MSFT price at expiry (S_T) is $150?

You are long 2 contracts of 1-yr call on MSFT with strike (K) of $220, and also long 2 contracts of 1-yr call on MSFT with strike (K) of $120. What will be your payoff if MSFT price at expiry (S_T) is $250?

You are long 2 contracts of 1-yr call on MSFT with strike (K) of $220, and also long 2 contracts of 1-yr call on MSFT with strike (K) of $120. What will be your payoff if MSFT price at expiry (S_T) is $200?

You are long 2 contracts of 1-yr call on MSFT with strike (K) of $220, and also long 2 contracts of 1-yr call on MSFT with strike (K) of $120. What will be your payoff if MSFT price at expiry (S_T) is $300?

Answer 1

The payoff on the call option with strike price $220 , at expiry the stock price is $100

So ,the pay off is zero.

When the strike price is $120 and the stock price at expiry us $100

So, the pay off is zero.

When the strike price is $220 and the stock price is $150,the pay off at expiration is zero.

Again the strike price is $120, the stock price is $150 at expiration

So, the pay off is $30 * 2= $60

Now, when the strike price is $220 and the stock price is $250, the pay off at expiration is :

= $30* 2

= $60

When the strike price is $120 and the stock price is $250, the pay off is : 2* ( $250 - $120)

= $260

When the strike price is $220 and the stock price is $200, the pay off is zero.

When the strike price is $120 and the stock price is $200, the pay off is 2* 80

= $160

When the strike price s $220 and the stock price is $300, the pay off 2* $80 = $160

When the strike price is $120 and the stock price is $300 the pay off is 2* 180 = $360