1. What is the difference between a covered call and a long currency? In other words, why do we do a covered call? What is the advantage of it?

2. Why would anyone do a long synthetic or a short synthetic? What is the difference between a long synthetic and a long currency? What is the difference between a short synthetic and a short currency?

3. You bought a call option on with an exercise price of $2 and you paid $0.05/ as premium. At the same time, you sold a put on with an exercise price of $2 and you received $0.12/ as premium. a. Please draw the combined profit graph. Show all appropriate numbers. b. What is the name of this strategy? c. What is the break-even point? d. What is your profit/loss if S T = $1.94/? e. What is your profit/loss if S T = $1.99/? f. What is your profit/loss if S T = $2.10/?

4. I have a long position in a put option on with an exercise price of $2.2/ (premium=$0.10) and a long position in a call option on with an exercise price of $2.32/ (premium=$0.07). Draw the combined graph. a. What is the name of this strategy? b. How many breakeven points do we have with the combined graph? What are they?

5. I have a short position in a put option on with an exercise price of $2.2/ (premium=$0.12) and a short position in a call option on with an exercise price of $2.32/ (premium=$0.09). Draw the combined graph. a. What is the name of this strategy? b. How many breakeven points do we have with the combined graph? What are they?

6. I shorted a call on euro (X=$1.5, Premium=$0.03) and also shorted a put on euro (X=$1.4, Premium=$0.04). a. Draw the profit graph for the combined position. Show all the break even points. b. If exchange rate at expiration is $1.32/euro, what will be my net profit/loss? c. If exchange rate at expiration is $1.53/euro, what will be my net profit/loss?