Question
Q) You want to make a straddle strategy and you ask your broker to list you the available options. The broker offers you the following
Q) You want to make a straddle strategy and you ask your broker to list you the available options. The broker offers you the following set of options, all of which have the same expiration date:
Call option with a strike price of $70 that costs $5.
Call option with a strike price of $75 that costs $6.
Put option with strike price of $77 that costs $5
Put option with strike price of $70 that costs $4
A.How can you create straddle strategy from the above set of options? In other words, what pair of the above options will you choose to create the straddle strategy?
B.For what range of future stock prices would the straddle lead to a gain, loss, and breakeven?
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