Question 9

GHI stock has a 6-month call option with a strike of $70 that sells for (i.e., has a premium of) $7.20, and a 6-month put option with a strike of $70 that sells for (has a premium of) $4.16. GHI stock currently sells for $72. If you write straddle, by how much 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)? One of the following four answers is correct. Please fully show your work to determine which answer you choose. The correct answer without correct supporting work will only receive 10 out of the available 20 points.a. The price cannot move down by more than $7.20.or up by more than $4.16 from its current level.

b. The price cannot move down by more than $9.20 or up by more than $2.16 from its current level.

c. The price cannot move down by more than $13.36 or up by more than $9.36 from its current level.

d. The price cannot move down by more than $11.36 or up by more than $11.36 from its current level.

PLEASE SHOW WORK