, the low-exercise-price option will be exercised but the high-exercise-price option will
not be exercised; hence:
Prot = (C
L
– C
H
) – (S
T
– S
L
) = 755 – S
T
us, when S
T
= 755,
Prot = INR 755 – INR 755 = 0,
and when S
T
= INR 760,
Prot = INR 755 – INR 760 = –INR 5
When S
T
> S
H
, both the options will be exercised:
Prot = C
L
– (S
T
– S
L
) + [(S
T
– S
H
) – C
H
]= (S
L
– S
H
) + (C
L
– C
H
)
us, the prot when S
T
= INR 780 is given by:
Prot = (INR 740 – INR 760) + (INR 35 ...
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