Consider a 50-65 1-year strangle strategy. You are given: (i) The stock currently sells for $55. (ii)
Question:
Consider a 50-65 1-year strangle strategy. You are given:
(i) The stock currently sells for $55.
(ii) In one year, the stock will either sell for $70 or $45.
(iii) The effective annual risk-free interest rate is 10%.
Calculate the price you now pay for the strangle.
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It turns out that the strangle pays 50 70 70 65 5 in ...View the full answer
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