Exhibit 22.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for a common stock $$\begin{array} { l c c }
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 22.50 & \$ 2.65 & \$ 1.85
\end{array}$$
-Refer to Exhibit 22.8. Calculate the payoff of a long straddle at an expiration stock price of $20.
A)-$4.50
B)-$2.00
C)$2.00
D)$4.50
E)$20.50

Question

Exhibit 22.8
USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider the following information on put and call options for a common stock $$\begin{array} { l c c } 
\text { Strike Price } & \text { Put Price } & \text { Call Price } \
\hline \$ 22.50 & \$ 2.65 & \$ 1.85
\end{array}$$
-Refer to Exhibit 22.8. Calculate the payoff of a long straddle at an expiration stock price of $20.
A)-$4.50
B)-$2.00
C)$2.00
D)$4.50
E)$20.50

Quizplus · Accepted Answer

A long straddle involves buying both a call and a put option. At a stock price of $20, the put option is in-the-money with a payoff of $2.50 ($22.50 - $20), and the call option is out-of-the-money with a payoff of $0. The total payoff is $2.50 - $2.65 (put price) - $1.85 (call price) = $2.00.

Exhibit 22 Strike Price Put Price Call Price $22.50$2.65$1.85\begin{array} { l c c } \text { Strike Price } & \text { Put Price } & \text { Call Price } \\\hline \$ 22.50 & \$ 2.65 & \$ 1.85\end{array} Strike Price $22.50​ Put Price $2.65​ Call Price $1.85​​

Exhibit 22 $\begin{array} { l c c } \text { Strike Price } & \text { Put Price } & \text { Call Price } \\\hline \$ 22.50 & \$ 2.65 & \$ 1.85\end{array}$