Draw well-labelled diagrams showing the payo s for the following investments as a function of the price of the stock index at maturity. Assume throughout that the price of each option contract is $5 and that one option contract is for one unit of investment in the index.

 

(a). Buy the index and sell a call at strike price $100.

 

(b) Buy a put at strike price $90 and buy a call at strike price $110.

 

(c) Buy a call at strike price $95 and sell a call at strike price $105.

 

(d) Buy a call and sell a put at strike price $100 on the index.