GHI stock has a 6-month call option with a strike of $74 that sells for (i.e., has
Question:
GHI stock has a 6-month call option with a strike of $74 that sells for (i.e., has a premium of) $7.20, and a 6-moth put option with a strike of $70 that sells for (has a premium of) $4.16. GHI stock currently sells for $72 if you create a straddle, buy how much can the stock price move from its current price in order for you to avoid having a lost (i.e., a profit that is negative)? Please show how to work it out.
a. The price cannot move down by more than $7.20 up by more than $4.16 from its current level.
b. The price cannot move down by more than $13.36 or up by more than $9.36 from its current level.
c. The price cannot move down by more than $9.20 or up by more than $2.16 from its current level.
d. The price cannot move down by more than $9.36 or up by more than $13.36 from its current level.
e. The price cannot move down by more than $2.16 or up by more than $9.20 from its current level.
f. The price cannot move down by more than $11.36 or up by more than $11.36 from its current level.