Compute the payoff and net payoff of a bear spread strategy built with put options in the three scenarios above. The put options should have strikes 405 and 409 and mature in February. Draw the profile of the bear spread strategy. Use the data in Table 2. Please show your calculations. Discuss your result.
Scenarios: You work in the
Scenario A: GDP will rise 3%. This will send the S&P ETF to 414.
Scenario B: GDP will stagnate. S&P ETF will stay at 407.
Scenario C: GDP will fall 2%. This will send the S&P ETF to 400.
Question 1:
Compute the payoff and net payoff of a bear spread strategy built with put options in the three scenarios above. The put options should have strikes 405 and 409 and mature in February. Draw the profile of the bear spread strategy. Use the data in Table 2. Please show your calculations. Discuss your result.
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