The following information is currently available for Canadian dollar (C$) options:
• Put option exercise price = $.75.
• Put option premium = $.014 per unit.
• Call option exercise price = $.76.
• Call option premium = $.01 per unit.
• One option contract represents C$50,000.
a. What is the maximum possible gain the purchaser of a strangle can achieve using these options?
b. What is the maximum possible loss the writer of a strangle can incur?
c. Locate the break-even point(s) of the strangle.