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Determine the spot price at expiration

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Reference no: EM131543814

Most of the examples in this section use the following premiums,which are based on the Black-Scholes formula for a stock currently selling at $100, a 6-month expiration date, a 4% effective rate for a 1/2 year period and no stock dividends.

Strike price = $90, 100, 110

Call = $16.36, 10.35, 6.11

Put = $2.90, 6.50, 11.88

Question: Determine the spot price at expiration for which the profit under a straddle (combination of a 100-strike call and put) and a strangle (combination of a 90-strike put and a 110-strike call) are the same.

Reference no: EM131543814

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