The Straddle Strategy: 1162864

PROBLEM: THE STRADDLE STRATEGY
A STRADDLE PURCHASE IS BUYING BOTH A PUT AND A CALL WITH THE SAME STRIKE PRICE AND EXPIRATION DATE ON THE SAME STOCK.
THE INVESTOR WILL PROFIT WHEN THE PRICE OF THE STOCK RISES OR FALLS FROM THE STRIKE PRICE BY AN AMOUNT 
WHICH EXCEEDS THE TOTAL COST OF THE PREMIUMS PAID.
THE INVESTOR HAS A PREDETERMINED MAXIMUM LOSS EQUAL TO THE AMOUNT OF HIS INITIAL INVESTMENT.
SEE INPUT DATA BELOW.
QUESTIONS:
* USE MONTE CARLO SIMULATION ( 1000 ITERATIONS), AT A VOLATILITY = 20%, AND COMPUTE 1) MEAN PROFIT $  2) ROI % 3) VaR of PROFIT $ and ROI% at 5th Pctl
* GRAPH PROFIT $ AGAINST STOCK PRICE
* RE-COMPUTE THE THE ABOVE STATISTICS , BUT VARY THE VOLATILITY FROM 10% TO 40% IN 10% INCREMENTS; SAVE EACH SET OF RESULTS
* DISCUSS YOUR RESULTS
INPUT DATA:
XYZ at the money call and put
Input dataStarting Price$100 Days in FutureSimulated PriceProfit
Stock price$100 <— inputVolatility20.00%198.7709258312.54
Exercise price$100 <— inputDaily Volatility1%297.825733613.48
Duration0.5000<— input397.7507043213.56
Interest rate/Stock Growth rate5.00%<— inputMean124.2986229498.1008908313.21
Revenue$24 599.268812.04
Implied volatility (stdev)20.00%<— inputCost$11.31 698.6055800212.70
Profit12.990797.6061676813.70
COSTS:ROI115%895.2232003616.09
Call price$6.89 <— input995.8319731515.48
Put price$4.42 <— inputVAR (ROI)81.9%1093.5671039617.74
VAR ($)12.6601196.2261702215.08
1297.7616179313.55
Straddle Cost$11.31 1398.4508250412.86
call price1498.7283639112.58
1599.2948585412.01
1699.6871369911.62
1799.8703561911.44
1899.910445411.40
1998.8066746312.50
20102.09716259.21
21102.40189178.91
22102.67026868.64
23104.73231096.58
24104.58634996.72
25103.48384687.82
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27102.99095138.32
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30107.88721123.42
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