Here we are giving the pay off matrix for the whole strategy on expiry. Since markets can expire at different pints, we have considered different range of points for calculating the pay offs. Please note, although we are considering payoffs for different points on expiry, not required that we need to keep this strategic position till expiry. Anytime in between the series, we can book our profits.
Another assumption is that we are not doing any adjustment at all, which should not be the case if you are a trained option trainer.
So, this will be the payoff matrix on expiry, without adjustments in the positions.
Cost of creating the strategy = 13
7800 pe purchased at 106
7700 pe sold at 72
7400 pe sold at 21
|Market Expires At||7800 PE||7700 PE||7400 PE||P/L|
Above 7800 expiry, it will remain as -13 only and below 7300, it will start increasing. So in such a scenario, it is always better to close the positions even if market touches 7400 (assuming you are not aware of any adjustment process at all, which we discuss in length in our workshops).
Hope this will take care of most of the queries.