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uppose the DJIA stands at 24,800. You want to set up a long straddle by purchasing 100 calls and an equal number of puts on
uppose the DJIA stands at 24,800. You want to set up a long straddle by purchasing 100 calls and an equal number of puts on the index, both of which pire in three months and have a strike of 248. The put price is listed at $4.30 and the call sells for $5.30. What will it cost you to set up the straddle, and how much profit (or loss) do you stand to make if the market falls by 650 points by the expiration dates the options? What if it goes up by 650 points by expiration? What if it stays at 24,800? Repeat part a but this time assume that you set up a short straddle by selling/writing 100 Oct 248 puts and calls. What do you think of the use of option straddles as an investment strategy? What are the risks, and what are the rewards? RE (Round to the nearest dollar. Enter a positive che market goes up by 650 points by the expiration dates on the options, the profit (or loss) is $ mber for a profit and a negative number for a loss.) (Round to the nearest dollar. Enter a positive number for he market stays at 24,800 by the expiration dates on the options, the profit (or loss) is $| profit and a negative number for a loss.) What do you think of the use of option straddles as an investment strategy? What are the risks, and what are the rewards? (Select the best choice low) A. Option straddles are extremely risky. For larger movements in the market, the short straddle will start losing money and the long straddle will start gaining money. B. Option straddles are extremely risky. For larger movements in the market, the short straddle will start gaining money and the long straddle will start losing money. C. Option straddles are not very risky. For larger movements in the market, the short straddle will start gaining money and the long straddle will start losing money. D. Option straddles are not very risky. For larger movements in the market, the short straddle will start losing money and the long straddle will start gaining money
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