Question $6$ Options Strategies $(20$ Marks$)$

$6\mathrm{.}1.$ An investor purchases a put contract with an exercise price of R$120$ for a premium of R$4.$

The investor simultaneously purchases the underlying share for R$125.$ Determine the profit on

this strategy if the share price at the expiration date $($i$)$ drops to R$100$; or $($ii$)$ increases to R$140.$

$(10$ marks$)$

$6\mathrm{.}2.$ An investor writes a call option with an exercise price of R$150$ and a premium of R$5.$ The

investor simultaneously purchases the underlying share for R$130.$ Determine the profit on this

strategy if the share price at the expiration date $($i$)$ drops to R$120$; or $($ii$)$ increases to R$160.$

$(10$ marks$)$