On Jan 1, 2021, I bought a straddle on a stock with a strike price of...
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On Jan 1, 2021, I bought a straddle on a stock with a strike price of 50. Recall that a long straddle is a combination of a long call and long a put with the same strike price and the same time to maturity. The expiration date of the straddle was December 31, 2021. The continuously compounded risk free rate is 3%. The price of the call when purchased was 4 and the price of the put was 6. The straddle was held to maturity and the position resulted in a negative profit. What can you deduce about the price of the stock on December 31, 2021. On Jan 1, 2021, I bought a straddle on a stock with a strike price of 50. Recall that a long straddle is a combination of a long call and long a put with the same strike price and the same time to maturity. The expiration date of the straddle was December 31, 2021. The continuously compounded risk free rate is 3%. The price of the call when purchased was 4 and the price of the put was 6. The straddle was held to maturity and the position resulted in a negative profit. What can you deduce about the price of the stock on December 31, 2021.
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Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
Posted Date:
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