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I don't understand why the profit is St - 70, and 50 - St. Could you explain it step by step, thank you! Problem 11.12.
I don't understand why the profit is St - 70, and 50 - St. Could you explain it step by step, thank you!
Problem 11.12. A call with a strike price of $60 costs $6. A put with the same strike price and expiration date costs $4. Construct a table that shows the profit from a straddle. For what range of stock prices would the straddle lead to a loss? A straddle is created by buying both the call and the put. This strategy costs $10. The profit/loss is shown in the following table: S; -70 T T Stock Price Payoff Profit S, > 60 S, -60 S, 360 This shows that the straddle will lead to a loss if the final stock price is between $50 and $70. 60-ST. 50-S, TStep by Step Solution
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