Reska, Inc., has constructed a long euro straddle. A call option on euros with an exercise price

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Reska, Inc., has constructed a long euro straddle. A call option on euros with an exercise price of $1.10 has a premium of $.025 per unit. A euro put option has a premium of $.017 per unit. Some possible euro values at option expiration are shown in the following table. (See Appendix B in this chapter.)


Value of Euro at Option Expiration


$.90

$1.05

$1.50

$2.00

Call





Put





Net






a. Complete the worksheet and determine the net profit per unit to Reska Inc. for each possible future spot rate.

b. Determine the break-even point(s) of the long straddle. What are the break-even points of a short straddle using these options?

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