Question

Buying a Straddle: Betty buys a straddle on Lehigh that has a strike price of $40.75....

Buying a Straddle: Betty buys a straddle on Lehigh that has a strike price of $40.75. The premium of the call is $1.20 and the premium of the put is $1.60. Calcuate the net profit or loss on buying the straddle if at the time of expiration the price per share of Lehigh is $83.20.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

In Straddle We buy one call option and one put Option

Strike Price = $ 40.75

Closing price = $ 83.20

We will exercise the Call option and will not exercise the Put Option

So Profit = Current Price - Strike Price - Call Premium - Put Premium

= 83.20 - 40.75 - 1.2 - 1.6

= $ 39.65  

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

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
Given the following information, price of a stock $39 strike price of a six-month call $35...
Given the following information, price of a stock $39 strike price of a six-month call $35 market price of the call $  8 strike price of a six-month put $40 market price of the put $  3 finish the following sentences. a. The intrinsic value of the call is _________. b. The intrinsic value of the put is _________. c. The time premium paid for the call is _________. d. The time premium paid for the put is _________. At the expiration...
Suppose you buy a straddle on Zoom with a strike price of $134. The current premium...
Suppose you buy a straddle on Zoom with a strike price of $134. The current premium on $134 call is $7.80; the current premium on a $134 put is $5.40. a) Explain the payoff and profit if the stock price is $115 at expiration. b) Explain the payoff and profit if the stock price is $155 at expiration. c) What is/are the break-even stock price(s) for the strategy? d) Why might you engage in such a strategy?
An investor purchases one call option (strike price $43 and premium $1.20) and purchases 3 put...
An investor purchases one call option (strike price $43 and premium $1.20) and purchases 3 put options (strike price $43 and premium $1.65) on the same underlying stock. What is the investor's total profit or loss (enter profit as positive or a loss as a negative value) per share if the stock price at expiration is $21.15?
Suppose a trader buys a call option with a strike price of $30 and a premium...
Suppose a trader buys a call option with a strike price of $30 and a premium of $3.03. When the option was purchased (three months previous), the stock traded for $31/share. At expiration, the stock traded for $38/share. What is the traders net profit or loss, per share? (Type just the number to two decimal places in the response box, without commas, dollar signs or percent signs. Do not enter commas but use negative sign if necessary
The price of a stock is $61 and a call option with a strike price of...
The price of a stock is $61 and a call option with a strike price of $60 sells for $5 (i.e., the option premium is $5.). *SHOW WORK* (a) What is the option’s intrinsic value? (b) What is the option’s time premium? (c) You purchased the call for $5. If, at the expiration of the call, the price of the stock is $66, what is the profit (or loss) from buying the call? (d) You purchased the call for $5....
-You wrote a put option on AAPL stock with a strike price of $140 and a...
-You wrote a put option on AAPL stock with a strike price of $140 and a put premium of $17.35. The stock price at expiration is $115.00. What is your profit or loss? - You bought a put option on the SPY ETF with a strike price of $195 and a put premium of $0.95. The stock price at expiration is $190.50. What is your profit or loss? -You took a “bear spread” position on the VXX EFT by buying...
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...
The recent price per share of Company X is $50 per share. Verna buys 100 shares...
The recent price per share of Company X is $50 per share. Verna buys 100 shares at $50. To protect against a fall in price, Verna buys 100 put, covering 100 shares of Company X, with a strike price of $40. The put premium is $1 per share. If Company X closes at $45 per share at the expiration of the put, and Verna sells her shares at $45. What would be Verna's total profit and loss from investing in...
You purchase one SDB $125 strike price call contract (equaling 100 shares) for a premium of...
You purchase one SDB $125 strike price call contract (equaling 100 shares) for a premium of $5. You hold the option until the expiration date, when SDB stock sells for $123 per share. What will be your payoff at expiry? What will be your profit/loss? You write one SDB $120 strike price put contract (equaling 100 shares) for a premium of $4. You hold the option until the expiration date, when SDB stock sells for $121 per share. What will...
The current price of Stock A is $305/share. You believe that the price will change in...
The current price of Stock A is $305/share. You believe that the price will change in the near future, but your are not sure in which direction. To make a profit from the price change, you purchase ONE call option contract (each contract has 100 calls) and TWO put option contracts (each contract has 100 puts) at the same time. The call option and the put option have the same expiration date. The strike price of the call option is...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT