Question

You plan on trading options for a stock using a straddle strategy. The stock offers a...

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.

  1. For what range of stock prices would the straddle lead to loss?
  2. For what range of stock prices would the straddle lead to gain?
  3. Draw the profit and price diagram that shows the breakeven points as well as gain and loss areas.
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

ANSWER IN THE IMAGE((YELLOW HIGHLIGHTED). FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Assume you create a straddle for stock XYZ with a strike price of 120. The cost...
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...
Suppose you are given the following prices for the options on ABC stock: Strike (in $)                ...
Suppose you are given the following prices for the options on ABC stock: Strike (in $)                 call                  put 15.0                             1.6                   2.0 17.5                             1.2                   2.5 20.0                             0.9                   3.2 Suppose you take the following position: long one call with strike 15.0, short two calls with strike 17.5, and long one call with strike 20.0. Please draw the payoff at maturity. What would be the total gain (loss) on the above position if the stock price at maturity turned out to be...
Suppose you are given the following prices for the options on ABC stock: Strike (in $)                ...
Suppose you are given the following prices for the options on ABC stock: Strike (in $)                 call                   put 15.0                             1.6                   2.0 17.5                             1.2                   2.5 20.0                             0.9                   3.2 Suppose you take the following position: long one call with strike 15.0, short two calls with strike 17.5, and long one call with strike 20.0. Please draw the payoff at maturity.                                                      What would be the total gain (loss) on the above position if the stock price at maturity turned out to be...
You establish a straddle on Walmart using September call and put options with a strike price...
You establish a straddle on Walmart using September call and put options with a strike price of $68. The call premium is $5.15 and the put premium is $5.90. a. What is the most you can lose on this position? (Input the amount as positive value. Round your answer to 2 decimal places.) Maximum loss            $ b. What will be your profit or loss if Walmart is selling for $77 in September? (Input the amount as positive value. Round your...
(please do it on paper) Suppose you are given the following prices for the options on...
(please do it on paper) Suppose you are given the following prices for the options on ABC stock: Strike (in $)                 call                   put 15.0                             1.6                   2.0 17.5                             1.2                   2.5 20.0                             0.9                   3.2 Suppose you take the following position: long one call with strike 15.0, short two calls with strike 17.5, and long one call with strike 20.0. Please draw the payoff at maturity.                                                      What would be the total gain (loss) on the above position if the stock price at...
Please Answer C: You establish a straddle on Walmart using the September call and put options...
Please Answer C: You establish a straddle on Walmart using the September call and put options with a strike price of $51. The call premium is $4.30 and the put premium is $5.05. a. What is the most you can lose on this position? (Input the amount as a positive value. Round your answer to 2 decimal places.) Maximum loss $ 9.35 b. What will be your profit or loss if Walmart is selling for $56 in September? (Input the...
A trader conducts a trading strategy by selling a call option with a strike price of...
A trader conducts a trading strategy by selling a call option with a strike price of $50 for $3 and selling a put option with a strike price of $40 for $4. Please draw a profit diagram of this strategy and identify the maximum gain, maximum loss,  and break-even point. Hint: Write down a profit analysis matrix to help you draw the payoff lines.
A one-month European put option on Bitcoin is with the strike price of $8,705 is trading...
A one-month European put option on Bitcoin is with the strike price of $8,705 is trading at $480. A one-month European call option on Bitcoin with the strike price of $8,705 is trading at $500. An investor longs a straddle using these options. At which prices of Bitcoin at the maturity of the options will this investor break even (i.e. no loss and no gain)?
Stock price is $150. You see an at-the-money call option trading at $15, and at-the-money put...
Stock price is $150. You see an at-the-money call option trading at $15, and at-the-money put trading at $5. The options have the same expiration date. You decide to buy a straddle. What will be the breakeven points of the strategy, i.e., at what stock prices will your profit will be exactly zero? Two breakeven points, S* = 145 and S* = 165 Two breakeven points, S* = 135 and S* = 155 One breakeven point, S* = 150 Two...
The common stock of XYZ Corporation has been trading in a narrow price range for the...
The common stock of XYZ Corporation has been trading in a narrow price range for the past a few months, and you are convinced it is going to break far out of that range in the next 1 year. You do not know whether it will go up or down, however. The current price of the stock is $100 per share, and the price of a 1-year call option at an exercise price of $100 is $10 and the put...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT