Question

GE Corporation has a put option selling for $2.90 and a call option selling for $1.95, both with a strike price of $29.00. What would the net value of a long straddle position be if the stock price at expiration is $35?
A) 7.15
B) $1.15
C) $1.15
D) $7.15
E) $36.15

Answer 1

Answer:

$1.15

Explanation:

Calculation for the net value of a long straddle position

Using this formula

Net value =(Stock price at expiration-Strike price)-Put option selling-Call option selling

Let plug in the formula

Net value = ($35-$29)-$2.90-$1.95

Net value=$6-$2.90-$1.95

Net value=$1.15

Therefore the net value of a long straddle position will be $1.15