QUESTION $3(100$ marks$)$

a$.$ A trader wants to speculate on the price of an asset by trading in options. The trader thinks that the price of the asset will not deviate considerably from its current price, $S_o.$

Task:

Design a strategy constructed with options for the trader. Provide as much information about this trading strategy as possible.

$(60$ marks$)$

b$.$ Explain and discuss the benefits and drawbacks of a Long Put Spread position compared to a Long Put position.

$(40$ marks$)$