Question $5(15$ marks$)$

The current stock price is $93.$ Assume that the risk$-$free rate is $0\%.$ Two options are European

types with the same maturity.

$2\mathrm{.}037$

a$)$ You long a put option with the strike price of $90,$ in which the put premium can be

inferred by its fair value. Graph the payoff and profit diagram of this portfolio at

option expiration date as a function of the stock price at that time. $(5$ marks$)$

b$)$ You sell a call option with the strike price of $95$ and purchase a call option with the

strike price of $90.$ Graph the payoff and profit diagram of this portfolio at option

expiration date as a function of the stock price at that time. $(5$ marks$)$

c$)$ You sell a put option with the strike price of $95$ and purchase a put option with the

strike price of $90.$ Compare the payoff and profit of this portfolio to those of the

portfolio in $($b$).(5$ marks$)$