Put and Call options are available on Canadian dollars (C$) with the following information:

Call option premium on Canadian dollar = $0.04 per unit

Put option premium on Canadian dollar = $0.02 per unit

Call option strike price = $0.70

Put option strike price = $0.70

One option contract represents C$50,000.

a) For spot rates of $ 0.5, $0.6, $0.7, $0.8, $0.9, determines the profit per unit and per contract for a long straddle strategy.

b) Construct contingency graph of the long straddle.

c) Explain why it is advantageous for a speculator to engage in a long straddle.