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For your second task Debbie asks you to evaluate an options strategy consisting of buying a call option and a put option, both with a $40 strike...
For your second task Debbie asks you to evaluate an options strategy consisting of buying a call option and a put option, both with a $40 strike price. Both options have the same maturity. The call costs $3 and the put costs $4. She asks you to draw a payoff diagram. If she buys one call contract and one put contract how much would she make if the price ends up at $35 how much money does she make? How much does she make if the price ends up at $50? After you show her what you came up with she mentions anticipating a drop in volatility & asks if you think this strategy makes sense---what do you tell her?
