Q2. Q3 Maxwell Advisors, a US based hedge fund is pursuing a short-straddle on Dominion Resources a relative low volatility stock. They write 100 puts with an exercise price of $65 for $2.45 per share and 100 calls with an exercise price of $70 for $2.70 per share. Both puts and calls have July 2021 expiration. The stock is currently trading for $68.94. Draw the pay-off diagram indication breakeven and calculate the maximum profit and loss on the straddle. Sam Stovall has initiated a covered call writing strategy on 1,000 XYZ Co, shares that he initially purchased for $200 per share. He has written 10 calls with a strike of $250 and a December 2020 expiration for $7 per share. XYZ stock is currently trading for $224. Draw the payoff from his combined position (long stock + shoricall) indicating breakeven, maximum profit and loss. Oakleaf Partners is a large cap closed end fund with $100 million in assets. The manager of the fund is nervous of the market downturns and would like to protect the downside without giving up the upside. The manager is able to sustain a decline of about 10% in value of assets. Using S&P 500 puts, calculate the cost of buying insurance for the fund. Show all your calculations and justify the choice of the puts. The option contract is cash settled and has a multiplier of $250. Use the internet to calculate option prices. Current level of the S&P 500 is 3,390. 04