Problem

16. You are planning to trade on the fortunes of a biotech firm that has a drug patent pen...

16. You are planning to trade on the fortunes of a biotech firm that has a drug patent pending FDA approval. If the patent is approved, the stock price is expected to go up sharply. If it is not approved, the stock will drop sharply, In your view, it is unlikely to move more than 20% in either direction. Describe a portfolio combining straddles and strangles that takes advantage of your view.

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Solutions For Problems in Chapter 8