You buy one Home Depot June 60 call contract and one June 60 put contract.The call premium is $5 and the put premium is $3. At expiration, you break even if the stock price is equal to
A)$52.
B)$60.
C)$68.
D)either $52 or $68.

Question

Quizplus · Accepted Answer

To break even on a straddle (buying both a call and a put with the same strike price and expiration), you need to add the total premium spent to the strike price to find the upper break-even point and subtract the total premium from the strike price to find the lower break-even point. Here, the total premium spent is $5 (call) + $3 (put) = $8. Adding and subtracting $8 from the strike price of $60 gives you break-even points at $52 and $68.

You Buy One Home Depot June 60 Call Contract and One