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Option Strategies 3 A call option expiring in two months has a strike price of $97.00...

Option Strategies 3

A call option expiring in two months has a strike price of $97.00 and is trading at a premium of c=$12.50. A put option expiring in two months has a strike price of $87.00 and is trading at a premium of p=$3.36. Find the higher expiration-date stock price at which a long strangle would break even.

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Answer #1

Higher Expiration-date stock price at which long strangle would break even = Call Strike price+ Initial cost

Here initial cost= Total Premium Paid

Therefore Max BEP = 97+(12.5+3.36)

=97+15.86

=$112.86

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