Explanation:
When , then the payoff from a long call with a strike price , will be,
and the payoff from a long put option with a strike price , will be,
But the total cost of setting up the strategy is USD 3; thus, the profit is given by,
$20 - S_T - 3 = 17 - S_T$
Q.4914 Suppose a strangle is created from a call option with a strike price of USD 35, which costs USD 1, and a put option with a strike price of USD 20, which costs USD 2. The two options have the same time to maturity. What is the profit as a function of the asset price, at option maturity, when ?
A
0
B
$17 - S_T$
C
-3
D
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