Question

Prices as shown on 20 Dec 2018

Apple Inc :  Current spot price: $ 150   

CALLS				PUTS
Dec	Jan	Feb	Strike Price	Dec	Jan	Feb
5	8.85	-	149	2.67	6.6	7.93
4.25	8.35	9.65	150	3.15	7	8.38
2.97	7	7.95	152	4.2	8.1	9.5
1.88	5.83	7.36	155	5.85	9.3	10.64

Construct a  Straddle diagram using data from the above table.

If  price of Apple Inc moves to 190 sometime in the near future how much profit will you make ?

Answer 1

A straddle is a trading strategy that involves buying a Call option and a Put option simultaneously for the same underlying asset at a certain point of time provided both options have the same expiry date and same strike price.

Step 1

We will Buy 150 Strike price December expiry call and put to construct a straddle

Step 2 - Total Premium paid

Expiry	Strike	Option	Buy/Sell	Price
Dec	150	Call	Buy	4.25
Dec	150	Put	Buy	3.15
				7.4

Total premium paid = 7.4

Step 3 - Payoff and profit

Particulars	Amount
Stock Price on Expiry	190
Payoff From Call option (190-150)	40
Payoff From Put option (Lapse)	0
Total Payoff	40
Option Premium Paid	7.4
Profit	32.6

Step 4 - Formulae