Question
GHI stock has a 6-month call option with a strike of $78 that sells for (i.e., has a premium of) $7.21, and a 6-month put
GHI stock has a 6-month call option with a strike of $78 that sells for (i.e., has a premium of) $7.21, and a 6-month put option with the same strike as the call that sells for (has a premium of) $4.32. GHI stock currently sells for $71. If you write a straddle, by how LOWER can the stock price move from its current price in order for you to avoid having a loss (i.e., a profit that is negative)? Be careful to note the question is asking the amount by which the stock price can change not the lowest price it can reach (for example, in a different problem if the current price were P = 20 and you determined the price could only move down to P = 15 before you would incur a loss, then your answer should be 5, not 15!). Express your answer to the nearest penny (two decimal places).
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