Look at Figure 23.8, which shows the possible future payoffs in July 2018 from a particular package of investments in Amazon options. Incidentally, this package of investments is called a ?straddle? by option buffs.

a. What package of investments would provide you with this set of payoffs?

b. How much would the package have cost you in January 2018?

c. Would it have made sense to hold this package if you thought that the price of Amazon stock was unlikely to change much?

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$1,300 $1,300 $2,600 Amazon stock price In July Possible payoffs in July 2018 Explration Date Exercise Price Call Price Put Price April 2018 $1,200 $132.70 $ 31.10 1,300 73.20 70.10 1,400 33.00 134.20 July 2018 1,200 161.70 53.55 1,300 104.00 96.00 1,400 62.55 156.05 January 2019 1,200 210.00 88.05 1,300 155.35 133.25 1,400 112.00 190.00