Question

Please kindly answer all of the question completely, suppose to answer those little boxes with the info that provided. Thank you .

Strangles Strangles are very similar to straddles in many ways: they are composed of a combination of puts and calls, and for the long position, extreme moves in the price of the underlying are necessary for the position to be profitable, and profitability is not dependent upon direction (a sharp downward move can also be profitable). The major difference between the strangle and the straddle is that with the strangle you must use different strike prices for the puts & calls. A long strangle is created by purchasing the same number of calls and puts on the same underlying with the same expiration, but with different strike prices. The long strangle is useful in markets that are about to experience high volatility, as extreme movements in the underlying are necessary for the position to be profitable. The risk/reward aspects are similar to those of the long straddle in that it offers limited risk and unlimited return. A short strangle is created by selling the same number of calls and puts on the same underlying with the same expiration, but with different strike prices. The short strangle is used in markets that are about to experience low volatility. It is established by selling both an OTM put and an OTM call, with the current price of the underlying centered between the two strike prices. This gives the trader a price range within which his/her position is profitable. $4.00 Long Strangle $2.00 Composition: Long a call with a high strike and long a put with a low strike, both with the same expiration 88 15o 112 124 136 148 160 172 184 i 196 208 Max Profit: Unlimited to the upside, limited by the price of the stock to the downside ---- Long Call - Long Put Max Loss: Debit incurred to buy strangle -----::---::------------ Long Strangle $12.00) $(4.00) $16.00) $(8.00) $(10.00) $(12.00) $(14.00) BEP: There are 2 -- lower strike minus debit & upper strike plus debit

Answer 1

YZA STOCK

1. Long strangle 90/210 means long 90 put and long 210 call

90 put = $2.44

210 call = $3.75

total cost = total debit incurred in premiums

= $2.44 + $3.75

= $6.19

2. there will be two BEP for strangle

low BEP = strike - premium cost = $90-$6.19=$83.81

High BEP = strike +premium cost =$210 +$6.19=$216.19

3. Value if YZA goes to $225= 90put - 0 & 210 call- $15

4. Value if YZA closes at $212=  90put - 0 & 210 call- $$2

EFG STOCK

1. Short strangle of 120/200 means short 120 put and short 200 call

120 put = $9.13

200 call= $13.63

total premium received = (3*$9.13 +3*13.63) = $68.28

2. there will be two break even points

low BEP = strike - premium cost = $120-$22.76=$97.24

High BEP = strike +premium cost =$200 +$22.76=$222.76

3. Value if YZA goes to $195= 120put- 0 & 200 call- 0

4. Value if YZA goes to $207= 120put- 0 & 200 call- 7