• Blaire



Describe how the trading strategy is constructed. Which call and/or put is (are) used to construct the trading strategy?

(b) What is the net payoff function for the trading strategy?

(c) Draw the profit and loss diagram of the trading strategy. Show the breakeven point(s), the strike price(s), and the maximal profit or loss of the trading strategy.

(d) What is your expectation of ABC’s stock when you construct the trading strategy?