(Strangle)

AstraZeneca plc (AZN) stock was trading at $45 in AUG and the following options prices are available:

SEPT 40 put - $1.50

SEPT 50 call - $1

Consider a short strangle using AZN by selling one SEPT 40 put and one SEPT 50 call. Answer the following questions.

A) What is the maximum profit you would expect from the strangle?

B) What are the two break-even prices for AZN on expiration?

C) What is the maximum loss you might experience from the strangle?

D) The stock price declined to $39 on the expiration. What is the amount of profit or loss from the short strangle?