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Consider a long straddle constructed from options which have an expiration date of January 14, 2022. The following table displays the possible prices of Acme

Consider a long straddle constructed from options which have an expiration date of January 14, 2022. The following table displays the possible prices of Acme stock on January 14, as well as the payoffs accruing to someone who holds a long straddle on Acme stock:

Probability 0.2 0.3 0.2 0.2 0.1
Stock Price $80 $90 $100 $110 $120
Gain from long straddle $20 $10 $0 $10 $20

5a. What will it cost an investor to buy a long straddle today?

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