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You think the price of AMZN stock, which is currently $900 is like change significantly over the next three months, you are just not = which direction. So you buy a long straddle position, with a call ar option, worth $8 and $6 per share, respectively, three months to expiration, and a strike price of $900.

You think the price of AMZN stock, which is currently $900 is like change significantly over the next three months, you are just not = which direction. So you buy a long straddle position, with a call ar option, worth $8 and $6 per share, respectively, three months to expiration, and a strike price of $900.

Essentials Of Investments
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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You think the price of AMZN stock, which is currently $900 is likely to change significantly over the next three months, you are just not sure which direction. So you buy a long straddle position, with a call and put option, worth $8 and $6 per share, respectively, three months to expiration, and a strike price of $900. What is the lower breakeven stock price? (There are two breakeven stock prices in this problem, answer the lower one) 4
Transcribed Image Text:You think the price of AMZN stock, which is currently $900 is likely to change significantly over the next three months, you are just not sure which direction. So you buy a long straddle position, with a call and put option, worth $8 and $6 per share, respectively, three months to expiration, and a strike price of $900. What is the lower breakeven stock price? (There are two breakeven stock prices in this problem, answer the lower one) 4
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