Underlying trading at 100 and 20 annualized implied, Ask an Expert

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Underlying trading at $100, and $20 annualized implied volatility. You think IV is too low and decide to buy a 90-110 strangle with 3 months to expiration (DTE=63).

(Hint: a strangle is a combination of OTM PUT and OTM CALL.)

Assume interest rate of zero and normal distribution of prices

What is the breakeven size of underlying movement, ie at what price of underlying in 1 day that your net PnL is zero?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92871894

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