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What is the maximum possible loss the writer of a strangle

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Reference no: EM131117838

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.

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: EM131117838

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