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:

Feel-good, Do-good Phenomenon

The psychological theory that suggests individuals are more likely to engage in altruistic behaviors when they are in a good mood.

Adaptation-level Phenomenon

A psychological principle suggesting that individuals judge new experiences based on past experiences and the levels of stimulation they have become accustomed to.

Catharsis

The process of releasing, and thereby providing relief from, strong or repressed emotions, often through art, drama, or other forms of expression.

Aggressive Action

Behavior intended to harm or injure another person, either physically or psychologically.