A stock is currently selling for $100. You expect the price to move dramatically but are uncertain
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A stock is currently selling for $100. You expect the price to move dramatically but are uncertain as to the direction. A call option to buy the stock at $100 is selling for $4, and a put option to sell the stock at $100 is selling for $3. Construct a straddle designed to take advantage of your expectation and verify the results for the following prices of the stock: $90, $93, $95, $100, $105, $107, and $110. What are the maximum possible gain, the maximum possible loss, and the break-even prices of the stock?
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