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What is the total profit or loss to the strangle buyer

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Reference no: EM132907828

Problem - Currency Strangles - Assume the following options are currently available for British pounds (£):

Call option premium on British pounds = $.04 per unit.

Put option premium on British pounds = $.03 per unit.

Call option strike price = $1.56

Put option strike price = $1.53

One option contract represents €31,250.

Required -

a. Construct a worksheet for a long strangle using these options.

b. Determine the break-even point(s) for a strangle.

c. If the spot price of the pound at option expiration is $1.55, what is the total profit or loss to the strangle buyer?

d. If the spot price of the pound at option expiration is $1.50, what is the total profit or loss to the strangle writer?

Reference no: EM132907828

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