What is the maximum possible loss on short straddle

Assignment Help Finance Basics
Reference no: EM132502298

Consider a short straddle constructed from options on 3M stock which have an expiration date of June 21, 2019 (the third Friday in June). The following table displays the only possible prices of 3M stock on June 21, as well as the payoffs accruing to someone who holds a short straddle on the stock:

Stock price$80$90$100$110$120

Gain from short straddle-$10$0$10$0-$10

A short straddle is created using two options. For each option in the short straddle above, indicate whether it is a put or a call, whether it is bought or sold, and what its strike price is. What is the maximum possible loss on this short straddle? What is the maximum possible loss on a real short straddle?

Explain your answer to all of the above questions

Reference no: EM132502298

Questions Cloud

Why would someone enter into a short straddle : Why would someone enter into a short straddle? Explain carefully.
Reimbursement from the insurance company : If the home is insured for $200,000 and the replacement value is $180,000, how much will Jim's reimbursement from the insurance company be?
Should the company accept the order : The maximum selling price that can be negotiated is f500 per unit for an order of 100 units over the next three months. Should the company accept the order?
What is the older americans act : First, what is the Older American's Act (OAA)? What is the significance of the OAA? How are funds distributed? What kinds of services are offered? Who benefits?
What is the maximum possible loss on short straddle : What is the maximum possible loss on this short straddle? What is the maximum possible loss on a real short straddle?
Determine pitchforks eps for net income : Determine Pitchforks EPS for Net Income, Dividends of $90,000 were declared on December 10, 2020; to be paid on January 10, 2021.
Value of this bond if it paid interest? semiannually : What would be the value of this bond if it paid interest? annually? What would be the value of this bond if it paid interest? semiannually?
Determine the income from continuing operations calculation : $20,000 (pre-tax). Both of these transactions were excluded in determining the $1,700,000 Income from Continuing Operations calculation
Why do auditors typically follow a control reliance strategy : In the case of Societe Generale, do you believe the external auditors gathered much controls related evidence regarding the Delta One trading desk/ Why

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd