When your profit from this investment is zero

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1. Suppose you write 30 put option contracts with a strike of $100 and expiring in 3 months. The put options are trading at $4.80. What is your net gain/loss if the underlying stock price at maturity is $110? What is the break-even price when your profit from this investment is zero?

2. A strangle is created by buying a put option, and buying a call on the same stock with higher strike price and same expiration. A put with an exercise price of $100 sells for $6.95 and a call with a strike of $110 sells for $8.60. Draw a graph showing payoff and profit for a strangle using these options.

Reference no: EM132058964

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