An investor has invested in a portfolio of three financial instruments on a stoc

Question

An investor has invested in a portfolio of three financial instruments on a stock:

-a short call option contract with a $40 strike price that costs $3 per share

-a short put option contract with a $45 strike price that costs $4 per share

-two long call option contracts with a $35 strike price that cost $5 per share

All options have the same expiration date. If the stock price at expiration is $60 per share, what is the profit gain (or loss) of this portfolio?

(Please try to write down the solution as clear as possible, I really want to learn about this.)

Explanation / Answer

short call option= 40-60 +3=- 17

short put option= 4

2 long call option = 2*(60-35-5)= 40

gain = 40+4 -17= 27

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