You establish a straddle on Walmart using September call and put options with a
ID: 2794629 • Letter: Y
Question
You establish a straddle on Walmart using September call and put options with a strike price of $66. The call premium is $5.75 and the put premium is $5.00.
a. What is the payoff on this position if Walmart is selling for $66 in September?
$
b. What will be your payoff if Walmart is selling for $46.2 in September?
$
c. What will be your payoff if Walmart is selling for $75.97 in September?
$
d. What is the cost of this investment strategy?
$
e. What will be your percent return if Walmart is selling $75.97 in September?
percent
References
Explanation / Answer
a. What is the payoff on this position if Walmart is selling for $66 in September?
=-(5.75+5.00)
=-10.75
b. What will be your payoff if Walmart is selling for $46.2 in September?
=(66-46.2)-(5.75+5.00)
=9.05
c. What will be your payoff if Walmart is selling for $75.97 in September?
=(75.97-66)-(5.75+5.00)
=-0.78
d. What is the cost of this investment strategy?
=5.75+5.00
=10.75
e.
return=-0.78/10.75
=-7.26%
the above is answers
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.