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Specify both original legs
The position holds one stock unit purchased at 100 and one same-unit put with strike 90 and premium 3. No underlying income, financing or other cost is supplied.
Add the put payoff to the stock
Terminal value is S+max(90−S,0)=max(S,90). Below 90, the put fills the difference up to 90. Above 90, the put expires with zero payoff while the stock contributes S.
Retain the premium in the cost
Initial unfinanced cost is 100+3=103. Thus the simple profit floor is 90−103=−13, not −10. At S=103 the simple position profit is zero.
| Terminal price | Combined terminal value | Simple profit |
|---|---|---|
| 0 | 90 | -13 |
| 80 | 90 | -13 |
| 90 | 90 | -13 |
| 100 | 100 | -3 |
| 103 | 103 | 0 |
| 120 | 120 | 17 |
Name what is protected
The model creates a terminal-value floor under the matching-unit assumed settlement. It does not make every interim marked value constant or remove the option’s cost. Contract exercise and settlement rules require their own record.