A) Determine the range of stock prices in 3 months for which straddle outperforms strangle.

B) Draw profit diagram of both straddle and strangle spread on the same graph. Carefully label the levels and turning points such as maximum profit, maximum loss, and break-even prices on the graph.

The current price of a non-dividend paying stock is $30/share. (Ignore time value of money) The following table shows call and put option premiums for three-month European of various exercise prices: Exercise Price 25 30 35 Call Premium 8.92 5.60 3.28 Put Premium 0.70 2.14 5.07 A trader interested in speculating on low volatility in the stock price is considering two investment strategies; straddle or strangle