tag:blogger.com,1999:blog-5871184605628305545.post5731193645056959836..comments2013-05-25T03:36:33.414-07:00Comments on Puzzled: Option on a diceAnonymoushttp://www.blogger.com/profile/02364548875097103884noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-5871184605628305545.post-26274093488556636302012-08-10T11:39:54.377-07:002012-08-10T11:39:54.377-07:00Strike Price = 3
Options are priced such that expe...Strike Price = 3<br />Options are priced such that expected gain becomes 0. Suppose option price is X<br />then, if 1,2,3 comes, you won't exercise ur option, therby net payoff = -x(Option price)<br />if 4,5,6 comes, you will exercise and payoff would be = number - 3 - x <br /><br />Expected Gain = 1*P(4) +2*P(5) +3*P(6) - x = 0<br />x = 1Anonymoushttps://www.blogger.com/profile/02364548875097103884noreply@blogger.com