Profit on a risk reversal
You put on a risk reversal: sell a $50-strike put for a $3 premium and buy a $55-strike call for $4 (same expiry, one share each). At expiry the underlying is at $60. What is your net profit per share, in dollars (a loss is negative)?
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- Value both legs at $60; the short put expires worthless above $50.
- Profit .
Answer
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Asked at: Timed Mental-Math & Sequences, Options Market-Making