Question
Barry Egan is a currency speculator. Barry believes that the Japanese yen will fluctuate widely against the U.S. dollar in the coming month. Currently, one-month
Barry Egan is a currency speculator. Barry believes that the Japanese yen will fluctuate widely against the U.S. dollar in the coming month. Currently, one-month call options on Japanese yen () are available with a strike price of $0.0088 and a premium of $0.0006 per unit. One-month put options on Japanese yen are available with a strike price of $0.0083 and a premium of $0.0004 per unit. One option contract on Japanese yen contains 6.25 million.
a. Assume Barry decides to construct a strangle in yen. What are the break-even points of this strangle? Round your answers to four decimal places.
Lower break-even point: $
Upper break-even point: $
b.What is Barry's total profit or loss if the value of the yen in one month is $0.0064? Use a minus sign to enter loss values, if any. Round your answer to the nearest dollar.
$
c.What is Barry's total profit or loss if the value of the yen in one month is $0.0093? Use a minus sign to enter loss values, if any. Round your answer to the nearest dollar.
$
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