SIE practice questionhardStraddles
What is the breakeven point(s) for a long straddle with a $40 strike if each option is bought for $3?
- A$46 and $34✓ Correct answer
- B$43 and $37
- C$40
- D$36 and $44
Explanation
Why A — $46 and $34
Breakeven is strike plus premium and strike minus premium ($40+$6, $40-$6), but since each is $3, total premium is $6, so $40+$6=$46 and $40-$6=$34. B and D use incorrect premium or math.
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