You establish a straddle on Walmart using September call and put options with a

Question

You establish a straddle on Walmart using September call and put options with a strike price of $59. The call premium is $4.70 and the put premium is $5.45.

What is the most you can lose on this position? (Input the amount as positive value. Round your answer to 2 decimal places.)

What will be your profit or loss if Walmart is selling for $67 in September? (Input the amount as positive value. Round your answer to 2 decimal places.)

At what stock prices will you break even on the straddle? (Input your answers from highest to lowest to receive credit for your answers. Round your answers to 2 decimal places.)

You establish a straddle on Walmart using September call and put options with a strike price of $59. The call premium is $4.70 and the put premium is $5.45.

Explanation / Answer

Straddle is a long position in both call and put

a) Max you can lose = premium in put and call = 4.7+5.45 = 10.15

b) Profit /loss= market price -strike price - (premium in put and call ) = 67-59-10.15 = -2.15

c) break even prices are : strike price+/-premium in put and call

=59+/-10.15 = 69.15 and 48.85

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