You Are Long Both a Put Option and a Call

question 33

Essay

You are long both a put option and a call option on Rockwood stock with the same expiration date.The exercise price of the call option is $40 and the exercise price of the put option is $30.Graph the payoff of the combination of options at expiration.

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Definitions:

Digital Display

An electronic screen or panel that shows information in visual form through digits, often found in devices like clocks, meters, and dashboards.

Hertz

Unit of wave frequency equivalent to one cycle per second.

Frequency

Number of repetitions of a process or series of events within a specific time frame.

Multiplexing

A technique in telecommunications and signal processing where multiple signals or information streams are combined into one signal over a shared medium.