Straddle contract

by | Jul 5, 2021 | Homework Help

Suppose you are an energy trader who bought a straddle contract on gasoline futures (size: 42,000 gallons). You paid $0.28 per gallon premium for the call and $0.20 per gallon premium for the put. Expiration of the contract is March of next year and strike price is $2.85 per gallon.

What will be your net profit or loss on the straddle contract for the following possible futures prices of gasoline at the expiration date in March?

a. $2.60 per gallon

b. $3.10 per gallon

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