Question

I screenshot everything and put them in order, please complete every little boxes. the others are the info provided for it.

Problems: Nondirection Dependent Strategies -- Straddles and Strangles Straddles and Strangles can be profitable regardless of which way the underlying moves -- profitability is not dependent on the direction of the underlying. Depending on whether you are long or short the position, profitability may not depend upon a move at all. This does not by any means make them "fool proof" strategies -- both can be expensive, and extremely risky, if neglected. Long straddles and long strangles are similar in their risk/reward approach in that both have limited risk and unlimited reward potential. Short straddlese and short strangles share the trader's desire for the underlying to remain stable because trading these from the short side is profitable when little ore no movement occurs e

Answer 1

1.

Straddle using Options on OPQ Stock :-

1.

A long straddle consists of buying call and put options having the same strike price and expiry dates

Total cost of purchasing one Sep 75 straddle = $8.88 + $6.25 = $ 15.13

2.

There will be 2 break-even points for this position :-

Breakeven point on the downside = $ (75 - 15.13) = $ 59.87

Breakeven point on the upside = $ (75 + 15.13) = $ 90.13

3.

If stock rallies to $95, value of the position = $ (95 - 90.13) = +$4.87 or $4.87 (Gain)

4.

Value if stock closes at $87 = $ (87 - 90.13) = -$3.13 or $3.13 (Loss)

5.

Value if stock closes at $55 = (59.87 - 55) = +$4.87 or $4.87 (Gain)