Assuming the strike price is $50, stock price is $50, the risk free rate is 2%, and it is a 6 month option, the call premium is $2.55, determine the price of implementing a straddle position and explain when the option position will make money and will the option position will lose money. Provide a profit chart to explain your results
1. If d1 is equal to 3, what will be the change in the price of a call option and put option when there is a $3.00 decrease in the price of the stock.
2. If your estimate of implied volatility on an option was less than the markets estimate would you want to write or buy put and/or call options? Please explain.