The answer is required in 30 min

A speculator expects steep movement in the stock of TMT Ltd. from the current level of Rs 165 in the next three months. He is not sure of the direction in which the price may take place. He wants to adopt the strategy suitable for his view. The following is the information relating to three months options on the stock of TMT Ltd.

Call Option		Put Option
Strike Price (Rs.)	Premium (Rs.)	Strike Price (Rs.)	Premium (Rs.)
162	7	162	1
165	4	165	3
168	2	168	5

The speculator believes that increase in the stock price as likely as its decrease. (a) Frame the STRADDLE strategy the speculator may adopt in that situation. (b) Calculate the maximum profit, maximum loss and breakeven under the strategy and draw the pay-off diagram. (c) Show the pay-off profile if stock varies between Rs 155 and Rs 175.