How are the payoff diagram the same for: a) Owning a stock and a put b) Buying a call option
The shape is the same but you need to figure in the value of the ZC Bond to equate the payoffs. a). Must be: Long Stock and Long Put Increase in payoff on Stock as price increases negates decrease in payoff on the put. At strike onwards, it’s all stock. b). Must be: Long ZC Bond and Long Call Up to strike, it’s all ZC bond. From strike onwards, increase in payoff on call adds to payoff on bond.