2. [Straddle]Suppose AAPL current price is $200. You purchase 10 calls with strike price equal to $200. You also bought 10 puts with strike price equals to $200. (This is called an option straddle) The put price is listed at $1.5 and the call is listed at $1.6. 1.What is the cost to set up the straddle? 2. What is your profit/loss if AAPL price goes to $210? $188? Stay at $200? 3. What do you think about the straddle strategy? When you lose money on this straddle strategy?
2. [Straddle]Suppose AAPL current price is $200. You purchase 10 calls with strike price equal to $200. You also bought 10 puts with strike price equals to $200. (This is called an option straddle) The put price is listed at $1.5 and the call is listed at $1.6. 1.What is the cost to set up the straddle? 2. What is your profit/loss if AAPL price goes to $210? $188? Stay at $200? 3. What do you think about the straddle strategy? When you lose money on this straddle strategy?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![2. [Straddle]Suppose AAPL current price is $200. You purchase 10 calls with strike price
equal to $200. You also bought 10 puts with strike price equals to $200. (This is called
an option straddle) The put price is listed at $1.5 and the call is listed at $1.6.
1. What is the cost to set up the straddle?
2. What is your profit/loss if AAPL price goes to $210? $188? Stay at $200?
3. What do you think about the straddle strategy? When you lose money on this straddle
strategy?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdd52b627-7ccc-49a2-b679-c9c0f4ba0ab7%2F502b7c7a-1cae-4f1e-a74f-f31683f4581f%2Fdenq8l_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. [Straddle]Suppose AAPL current price is $200. You purchase 10 calls with strike price
equal to $200. You also bought 10 puts with strike price equals to $200. (This is called
an option straddle) The put price is listed at $1.5 and the call is listed at $1.6.
1. What is the cost to set up the straddle?
2. What is your profit/loss if AAPL price goes to $210? $188? Stay at $200?
3. What do you think about the straddle strategy? When you lose money on this straddle
strategy?
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