Question 5 (14 marks) Roy constructs an options portfolio based on the MXC stock He writes a call option with exercise price $74 and writes a put option with exercise price $70 Both options have the same expiration date MXC Call MXC Put Put Option price $0 42 $0 58 Exercise price $74 $70 a Draw the payoff diagram of this portfolio at option expiration as a function of MXC stock price at that time (4 marks) b What will be the profit loss on this position if MXC is selling at $72 on the option expiration date What if MXC is selling at $77 (6 marks) c At what two stock prices will Roy break even on his position (4 marks)

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Question: Question 5 (14 marks) Roy constructs an options portfolio based on the MXC stock. He writes a call option with exercise price $74 and writes

Question 5 (14 marks) Roy constructs an options portfolio based on the MXC stock. He writes a call option with exercise price $74 and writes a put option with exercise price $70. Both options have the same expiration date.

	MXC Call	MXC Put
Put Option price	$0.42	$0.58
Exercise price	$74	$70

a. Draw the payoff diagram of this portfolio at option expiration as a function of MXC stock price at that time. (4 marks)

b. What will be the profit/loss on this position if MXC is selling at $72 on the option expiration date? What if MXC is selling at $77? (6 marks)

c. At what two stock prices will Roy break even on his position? (4 marks)

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