Question

You establish a straddle on Walmart using September call and put options with a strike price of $91. The call premium is $7.55 and the put premium is $8.30.

a. What is the most you can lose on this position? (Input the amount as positive value. Round your answer to 2 decimal places.)

Maximum Loss: (Answer This)

b. What will be your profit or loss if Walmart is selling for $93 in September? (Input the amount as positive value. Round your answer to 2 decimal places.)

Loss of (Answer This)

c. At what stock prices will you break even on the straddle? (Input your answers from highest to lowest to receive credit for your answers. Round your answers to 2 decimal places.)

Break Even Prices (Answer This) and (Answer This)

Answer 1

A) maximum loss will be = put premium + call premium = $7.55 + $8.30 = $15.85

B) profit/loss = selling price of walmart - strike price - premium paid on both call and put

= $93 - $91 - ($7.55+$8.3) = $13.85

C)

Upper break even = $91 + $15.85 = $106.85

Lower break even = $91 - $15.85 = $7515

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