Financial Risk Manager Part 1

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Explanation:

The initial cost of this trade (which is a "strap") = ($3.40*2) + $2.30 = $9.10. To achieve a 30% ROI, we must have 30% = profit/$9.10, such that profit = $9.10*0.30 = $2.73. Therefore, the payoff = $2.73 + 9.10 = $11.830; i.e., $11.830/$9.10 - 1 = 30.0%. On the downside, this is reached at $25.00 - $11.83 = $13.70; on the upside, this is reached at $25.00 + $11.83/2 = $30.92

Explanation:

Comments (1)

Nicholas MuuzoleehJun 17, 2026 9:30 AM

The questioned mentioned the cost of "the calls" instead of the cost of "a call" which meant the calls cost should not be multiplied by 2. I got 28.705 and 17.59 which are not part of the answers.

LeetQuiz .Jun 19, 2026 11:59 AM

Hi Nicholas, thank you for your comment. You’re right that the wording can be confusing; each call costs $3.40, so the total cost for two calls is $6.80, giving an initial outlay of $9.10. The trade reaches a 30 % ROI at $13.17 or $30.92, which corresponds to answer C. We’ll revise the wording to make this clearer. Thank you for your feedback.

Comments (1)

Nicholas MuuzoleehJun 17, 2026 9:30 AM

The questioned mentioned the cost of "the calls" instead of the cost of "a call" which meant the calls cost should not be multiplied by 2. I got 28.705 and 17.59 which are not part of the answers.

LeetQuiz .Jun 19, 2026 11:59 AM

Question 606.3

While the stock price is `$25.00`, a trader buys three at-the-money (ATM) options: two calls and one put. The each call costs `$3.40` and the put costs `$2.30`. The trader defines return on investment (ROI) as profit divided by initial cost without regard to the time value of money. The trader is aiming for an ROI of 30.0%. At what stock price(s) is the trade's ROI equal to 30.0%?

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MManit

Last updated: June 19, 2026 at 11:59

$38.00

25.0%

$19.23 or $36.51

25.0%

$13.17 or $30.92

41.7%

This trade cannot achieve an ROI of 30.0%

8.3%