Lose money on your straddle strategy

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1. You purchase one IBM July 120 call contract for a premium of $5. You hold the option until the expiration date when IBM stock is at $123 per share on the market. How much profit or loss you will realize on the investment?

2. You write one IBM July 120 call contract for a premium of $10. You hold the option until the expiration date when IBM stock is at $115 per share. How much profit or loss you will realize on the investment?

3. Suppose you purchase one Texas Instruments August 75 call contract quoted at $8.50 and write one Texas Instruments August 80 call contract quoted at $6. If, at expiration, the price of a share of Texas Instruments stock is $79, your profit would be?

4. You established a straddle strategy for Tesla aiming for expiration date of this June. Tesla June 250 call contract has a premium of $18 and Tesla June 250 put contract has a premium of $17. Current stock price of Tesla is at 252. If Tesla’s stock price decreased to $200 by June, how much profit or loss you will realize on the investment? At what price range by expiration date will you lose money on your straddle strategy?

Reference no: EM131088042

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