Financial Risk Manager Part 1

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Explanation:

A strap is a combination of two calls and one put.

First find the put price using put-call parity:

p = c + K e^{-rT} - S

p = 6.65 + 50e^{-0.04\cdot1} - 50 \approx 4.69

Total premium paid:

2(6.65) + 4.69 = 17.99

For the upside breakeven:

2(S-K) = 17.99 \Rightarrow S \approx 58.99 \approx 59.00

For the downside breakeven:

K-S = 17.99 \Rightarrow S \approx 32.01 \approx 32.00

So the breakeven range is lower than $32.00 or higher than $59.00.

Explanation:

A strap is a combination of two calls and one put.

First find the put price using put-call parity:

p = c + K e^{-rT} - S

p = 6.65 + 50e^{-0.04\cdot1} - 50 \approx 4.69

Total premium paid:

2(6.65) + 4.69 = 17.99

For the upside breakeven:

2(S-K) = 17.99 \Rightarrow S \approx 58.99 \approx 59.00

For the downside breakeven:

K-S = 17.99 \Rightarrow S \approx 32.01 \approx 32.00

So the breakeven range is lower than $32.00 or higher than $59.00.

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MManit

Last updated: April 18, 2026 at 11:32

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