Question: answer question3 2) A straddle is a position that is long both a call and a put with the same strike price. Consider such a

answer question3 2) A straddle is a position that is long both a call and a put with the same strike price. Consider such a position with a strike price of $50. The premium for the call is $3 and the premium for the put is $2. Create a table and graph the overall payoff and net profit of this position as a function of ST, the stock price at maturity. Vary ST from $40 to $60 in increments of $2. What might your view be about ST if you were to take such a position? To answer this question, assume that the current stock price is $50

3) A strangle is a position that is long both a call and a put with the put having a lower strike price than the call. Consider such a position with the put having a strike price of $48 and the call having a strike price of $52. The premium for the call is $1.50 and the premium for the put is $.50. Create a table and graph the overall payoff and net profit of this position as a function of ST, the stock price at maturity. Vary ST from $40 to $60 in increments of $2. How might your view about ST be different from a view that would cause you to take the straddle in the previous problem? To answer this question, assume again that the current stock price is $50.

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