25 Currency straddles. Reska Ltd has constructed a long euro straddle. A call option on euros with an exercise price of £0.61 has a premium of £0.015 per unit. A euro put option has a premium of £0.008 per unit. Some possible euro values at option expiration are shown in the following table. (See Appendix 5B in this chapter.)

a Complete the worksheet and determine the net profit per unit to Reska Ltd for each possible future spot rate.

b Determine the breakeven point(s) of the long straddle. What are the breakeven points of a short straddle using these options?

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Value of euro at option expiration 0.50 Call Put Net 0.55 0.60 0.65