Problem
Suppose you buy a straddle by purchasing one Clearwire August $50 call option contract quoted at $4 and also purchasing one Clearwire August $50 put option contract quoted at $5, where $50 is the strike price for both options. The two options have the same expiration date.
If the Clearwire stock price is $30 at expiration, what is your payoff from the call option? What your payoff from the put option? What is your total payoff from the straddle? What is your profit (loss)?
If the Clearwire stock price is $55 at expiration, what is your payoff from the call option? What your payoff from the put option? What is your total payoff from the straddle? What is your profit (loss)?