Currency straddles. Reska Ltd has constructed a long euro straddle. A call option on euros with an exercise price of £0.61 has a premium of £0.015 per unit. A euro put option has a premium of £0.008 per unit. Some possible euro values at option expiration are shown in the following table.
a. Complete the worksheet and determine the net profit per unit to Reska Ltd for each possible future spot rate.
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Value of euro at option expiration
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£0.50
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£0.55
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£0.60
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£0.65
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Call
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Put
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Net
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b. Determine the breakeven point(s) of the long straddle. What are the breakeven points of a short straddle using these options?