Question: Long currency straddle Call option premium = $0.05/, Put option premium = $0.05/ Strike price = $1.10/, Option contract size = 62,500 Draw graphs of
- Long currency straddle
- Call option premium = $0.05/, Put option premium = $0.05/
- Strike price = $1.10/, Option contract size = 62,500
- Draw graphs of call option, put option, and straddle
- Mark BE point and Strike prices
- Mark each premium
| Spot exchange rate | $1.00/ | $1.05/ | $1.10/ | $1.15/ | $1.20/ | $1.25/ | |
| Long call option | Exercise (N/Y) |
|
|
|
|
|
|
| Holders net profit per unit |
|
|
|
|
|
| |
| Long put option | Exercise (N/Y) |
|
|
|
|
|
|
| Holders net profit per unit |
|
|
|
|
|
| |
| Net profit |
|
|
|
|
|
| |
Net profit per unit (graph)
- Short currency straddle
- Call option premium = $0.05/, Put option premium = $0.05/
- Strike price = $1.10/, Option contract size = 62,500
- Draw graphs of call option, put option, and straddle
- Mark BE point and Strike prices
- Mark each premium
| Spot exchange rate | $1.00/ | $1.05/ | $1.10/ | $1.15/ | $1.20/ | $1.25/ | |
| Sell call option | Does holder exercise? |
|
|
|
|
|
|
| Holders net profit per unit |
|
|
|
|
|
| |
| Sellers net profit per unit |
|
|
|
|
|
| |
| Sell put option | Does holder exercise? |
|
|
|
|
|
|
| Holders net profit per unit |
|
|
|
|
|
| |
| Sellers net profit per unit |
|
|
|
|
|
| |
| Net profit |
|
|
|
|
|
| |
Net profit per unit (graph)
Step by Step Solution
There are 3 Steps involved in it
1 Expert Approved Answer
Step: 1 Unlock
Question Has Been Solved by an Expert!
Get step-by-step solutions from verified subject matter experts
Step: 2 Unlock
Step: 3 Unlock