Question:

We are given the following information relating to options on Oracle stock:

$30-$day call options on Oracle with a strike price of $$95$ were priced at $$7($premium$)$

$30-$day put options on Oracle with a strike price of $$85$ were priced at $$9($premium$)$

Mr$.$ Ramachandra, a derivatives analyst based out of New York, simultaneously purchases $10,000$ of the above call options along with $10,000$ of the above put options.

Answer the following:

a$.$ Name the strategy adopted by Mr$.$ Ramachandra.

b$.$ What is the maximum gain from this strategy?

c$.$ What is the maximum loss from this strategy?

d$.$ What is the profit$/$loss from this strategy if Oracle stock price rises to $$130?$

e$.$ What is the profit$/$loss from this strategy if Oracle stock price falls to $$52?$

f$.$ What are the break$-$even points for this strategy?

g$.$ Mr$.$ Ramachandra's nephew, who is a fresh MBA graduate, after studying the above strategy, makes the following comment: "Uncle, this strategy appears to be very profitable only if Oracle stock falls dramatically." Is his observation correct? Explain succinctly in a few words why he is right or wrong.