Question
11. A trader sells a 1 month Straddle (Options Strategy) by selling a Put with a $185 strike for $2.25 and selling a call with
11. A trader sells a 1 month Straddle (Options Strategy) by selling a Put with a $185 strike for $2.25 and selling a call with a $185 strike for $4.75. a. What is the max gain on this strategy? b. What is the max loss on this strategy if the stock declines? c. Is the trade more likely to be profitable if realized volatility until expiration ends up being higher or lower than implied volatilities? d. What are the 2 breakeven points for this strategy? e. Draw a profit/loss (at expiration) graph for this strategy. (must include strike and breakevens)
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