Question

You are interested in a trading strategy with option combinations: straddle or strangle. Both strategies involve buying the equal amount of call and put options underlying the same stock.

- Consider a straddle using a call with a strike price of $100 and a put with the same strike price and expiration date. The call costs $5 and the put costs $4. For what range of stock prices would the straddle lead to a loss?
- Now consider a strangle using the same call with a strike price of $100 and a different put with a strike price of $95. Both have the same expiration date. The call costs $5, while the put costs $2 (cheaper than the previous put with the strike price of $100). For what range of stock prices would the strangle lead to a loss?
- If you believe the stock price can largely increase in the future, which strategy is more attractive – the straddle in Question A or the strangle in Question B?

Answer #1

You plan on trading options for a stock using a straddle
strategy. The stock offers a call with a strike price of $75 with a
premium of $4. It also offers a put with a strike price of $75 with
a premium of $7. Both options expire on the same day.
For what range of stock prices would the straddle lead to
loss?
For what range of stock prices would the straddle lead to
gain?
Draw the profit and price...

What trading position is created from a long strangle and a
short straddle when both have the same time to maturity? Assume
that the strike price in the straddle is halfway between the two
strike prices of the strangle.

what trading position is created from a long strangle and a short
straddle when both have the same time to maturity? assume that the
strike price in the straddle is halfway between the two strike
price of the strangle

Straddle: Long $80 Call at $6, Long $80 Put at $4
Top Strangle: Short $75 Put for $9, Short $85 Call for $11
For each of the 2 option strategies below
please:
Calculate the initial cash flow (CF0)
Produce a table showing the Value and Profit at expiration
(VT and ΠT) for each relevant range of the
underlying stock price (ST)
The range over which the strategy is profitable

One popular combination is the strip, which involves buying a
call and two puts with the same expiration date and strike prices.
A three month call with strike of $60 costs $4. A three month put
with the same strike price costs $3. Do you have to pay to initiate
the sale of a strip involving the above two options? For what range
of stock prices at expiration would a short position in the strip
above lead to a loss?...

One popular combination is the strip, which involves buying a
call and two puts with the same expiration date and strike prices.
A three month call with strike of $60 costs $4. A three month put
with the same strike price costs $3. Do you have to pay to initiate
the sale of a strip involving the above two options? For what range
of stock prices at expiration would a short position in the strip
above lead to a loss?...

Which of the foloowing position is a straddle?
Long a call and long a put with same strike price and expiration
date.
Long two calls at different prices ut same expiration date
Short two puts at different prices but same expiration date
None of above

Assume you create a straddle for stock XYZ with a strike price
of 120. The cost of the put (X=120) is 5 and the cost of the call
(X=120) is 7. The current stock price is 120.40.
1. What are the breakeven prices for this
strategy:
108.00 and 132.00
123.00 and 125.00
123.60 and 125.60
115.00 and 127.00
115.40 and 127.40
2. If the stock price at expiration (S1) is
110. The $ gain/loss from this strategy is:
gain of...

Question 8
The common stock of IBM has been trading in a narrow price
range for the past month, and you
are convinced it is going to break far out of that range in
the next three months. You do not know
whether it will go up or down, however. The current price of
the stock is $100 per share, the
price of a three-month call option with an exercise price of
$100 is $10, and a put with the...

A trader creates a long strangle with put options with a strike
price of $90 per share, and call options with a strike of $105 per
share by trading a total of 40 option contracts (buy 20 put
contracts and buy 20 call contracts). Each contract is written on
100 shares of stock. The put option is worth $10.5 per share, and
the call option is worth $6.5 per share.
A) What is the value of the strangle at maturity...

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