Solution-What differences between bear and bull spreads

What differences between bear and bull spreads

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Question (a) What are the similarities and differences between bear and bull spreads?

Question (b) Why is a straddle position considered a speculation on the asset's volatility?

Question (c) Reska, Inc., has constructed a long euro straddle. A call option on euros with an exercise price of $1.10 has a premium of $.025 per unit. A euro put option has a premium of $.017 per unit. Some possible euro values at option expiration are shown in the following table.

(i) Complete the worksheet and determine the net profit per unit to Reska Inc. for each possible future spot rate.

(ii) Determine the break-even point(s) of the long straddle. What are the break-even points of a short straddle using these options?

(iii) Based on the above information, construct a contingency graph for a long euro straddle.

(iv) Based on the above information, construct a contingency graph for a Short euro straddle.

Reference no: EM132503484

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What differences between bear and bull spreads

Reference no: EM132503484

Reference no: EM132503484

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