(See Appendix B in this chapter.) Assume the following options are currently available for British pounds (£):
¦ Call option premium on British pounds = $.04 per unit.
¦ Put option premium on British pounds = $.03 per unit.
¦ Call option strike price = $1.56.
¦ Put option strike price = $1.53.
¦ One option contract represents £31,250.
a. Construct a worksheet for a long strangle using these options.
b. Determine the break-even point(s) for a strangle.
c. If the spot price of the pound at option expiration is $1.55, what is the total profit or loss to the strangle buyer?
d. If the spot price of the pound at option expiration is $1.50, what is the total profit or loss to the strangle writer?
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