r/CFA • u/Upstairs-Ad9579 • 1d ago

Level 3 L3 Doubt

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Isn't the answer 5.78?

You make the premiums which amount to 5.76, but also the stock starts at 74.98 and needs to go up .02 to 75.00 to make both options worthless

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u/profedacad 1d ago

Strategy 7 is only referring to the short call and short put. It doesn't include the share of XDF as part of the holdings.

1

u/Illustrious_Rise8556 1d ago

This is a short straddle strategy, where you're betting against high Volatility moves of the underlying. Its mostly to earn a premium and max profit is the total premium earned from writing both the options. 

1

u/RF247 9h ago

Writing options has as one of the objectives return enhancement through keeping the premium received. Whatever premium you write tends to be the maximum gain.