Question
On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021
On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC stock with an exercise price (K) of $40 is currently priced (P) at $2 per share. Also, two call options on ABC stock with exercise prices (K) of $40 and $65 are priced (C) at $2.5 and $1.50 per share, respectively. All options expire on December 21, 2021. What will be net profit/loss per share on a short straddle (not long straddle) if the stock price is $40 per share?
-$4.5
$25.5
$10.5
$4.5
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