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A US based hedge fund is pursuing a short-straddle on Dominion Resources a relative low volatility stock. They write 100 puts with an exercise price
A US based hedge fund is pursuing a short-straddle on Dominion Resources a relative low volatility stock. They write 100 puts with an exercise price of $65 for $2.45 per share and 100 calls with an exercise price of $70 for $2.70 per share. Both puts and calls have July 2021 expiration. The stock is currently trading for $68.94. Draw the pay-off diagram indication breakeven and calculate the maximum profit and loss on the straddle.
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