Explanation:

For a long straddle, the breakeven move equals the total premium paid for the call plus the put.

Using put-call parity:

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

p = 2.05 + 20 e^{-0.03\cdot 0.5} - 20 \approx 1.75

So total straddle cost is:

2.05 + 1.75 \approx 3.80

Therefore, the stock must move up or down by at least $3.80 for the position to break even.

Q-728.1. The risk-free rate is 3.0% and the stock price of Discovery Communications (ticker: DISCK) is `$20.00`. Peter purchases a straddle with six-month European at-the-money options; i.e., S = K = `$20.00`. If the price of a call option is `$2.05`, then how much will the stock price need to move in order for him to at least achieve breakeven profit (reminder that profit = final payoff +/- initial premium)?

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Last updated: April 18, 2026 at 11:32

DISCK must move up by at least $2.05

0.0%

DISCK must move down by at least $1.67

0.0%

DISCK must move up or down by at least $3.80

100.0%

DISCK must move up or down by at least $5.75

Financial Risk Manager Part 1