What is the maximum possible gain the purchaser

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Reference no: EM132907834

Problem - Currency Strangles - The following information is currently available for Canadian dollar (C$) options:

Put option exercise price = $.75

Put option premium = $.014 per unit.

Call option exercise price = $.76

Call option premium = $.01 per unit

One option contract represents C$50,000

Required -

a. What is the maximum possible gain the purchaser of a strangle can achieve using these options?

b. What is the maximum possible loss the writer of a strangle can incur?

c. Locate the break-even point(s) of the strangle.

Reference no: EM132907834

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