This is an option chain for options that expires in 110 days. You can assume T =
ID: 2817397 • Letter: T
Question
This is an option chain for options that expires in 110 days. You can assume T = 0.3 year
and there is no bid-ask spread, i.e. each option can be bought and sold at the same price.
calls
strikes
puts
13.46
11.81
10.26
8.83
7.53
6.36
50
52
54
56
58
60
0.66
1.00
1.44
2.00
2.68
3.50
An investor purchased the underlying asset at 45/unit some time ago.
Now, the investor forms a 52-58 collar on this asset. If at expiration, the spot price of the underlying asset is 50.
What is the total profit or loss per unit on the collared asset?
calls
strikes
puts
13.46
11.81
10.26
8.83
7.53
6.36
50
52
54
56
58
60
0.66
1.00
1.44
2.00
2.68
3.50
Explanation / Answer
The collar is: Long put and short call
Profit = payoff of long put option - payoff of short call p
Profit = Max(0,(X - St ) - Max(0, St - X) - premium paid for long put option + premium received for short call option + price of the underlying at time t - price of the underlying at time 0
Call at 58 strike and costs 7.53
Put at 52 strike and costs 1.00
Profit =( 52 - 50) - (50 -58) - 1 +7.53 +50 - 45
= 2 - 0 -1 + 7.53 + 5
= 13.53.
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