Problem 1/ For risk management purposes, "Bayon" decided to undertake a strategy consisting of seling a put with a strike price of 22.1098 for 2.11, selling a put with a strike price of 18.2451 for 0.56, and buy two puts with a strike price of 20,8931 for a total of 22488. She entered this position with 5000 contracts each contract containing 100 strategies that would expire in 3 months from now. What is the amount of her max loss? -67.920 -19,673 -78,615 -39,775 @ -60,800 -87245

Hence, the correct answer is the fourth option showing: - 39,775

Profit / Loss from a short put position = P - max (K - S, 0)

Profit / Loss from a long put position = max (K - S, 0) - P

Hence, net profit loss from one strategy = 2.11 - max (22.1098 - S, 0) + 0.56 - max (18.2451 - S, 0) + 2 x max (20.8931 - S) - 2.2488 = 2 x max (20.8931 - S) - max (22.1098 - S, 0) - max (18.2451 - S, 0) + 0.4212

Hence, net profit / (Loss) from 5000 contracts each with 100 strategies = [2 x max (20.8931 - S) - max (22.1098 - S, 0) - max (18.2451 - S, 0) + 0.4212] x 5,000 x 100

Let's plot the table for different values of S:

The maximum loss = -39,775

Hence, the correct answer is the fourth option showing: - 39,775