The following table contains basic information of a set of European options on a given non-dividend paying stock at the beginning of a trading day:

	Strike (pounds)	Premium (pounds)
Call	45	4
Put	45	2

All options have the same maturity of 3 months, and the risk free interest rate is 0.5%. The current price of the underlying stock is £47. Calculate their payoff and profit functions of a straddle with strike £45 combination and represent the last one graphically. 

Answer rating: 100% (QA)

To calculate the payoff and profit functions of a straddle with a strike price of 45 we need to cons... View the full answer