Reference no: EM132737751

Maggie Hawthorne is a currency speculator. she has noticed recently that the euro has appreciated substantially against the US dollar. the current exchange rate of the euro is $1.15. after reading a variety of articles on the subject she believes that the euro will continue to fluctuate substantially in the months to come. although most forecasters believe that the euro will depreciate against the dollar in the near future Maggie think that there is also a good possibility of further appreciation. currently a call option on euros is available with an exercise price of $1.17 and a premium of $0.4. a euro put option with an exercise price of $1.17 and a premium of $0.3 is also available

Problem a) Maggie decides to uses a long straddle to speculate on the euros value. an option expiration the value of the euro is $1.30. what is profit or the loss from a long straddle position?

Problem b) Maggie decides to uses a long straddle to speculate on the euros value. an option expiration the value of the euro is $1.05. what is profit or the loss from a long straddle position?