The close prices for weekly Nifty Call options for various strikes are given below:

Date $24-$SEP$-202127-$SEP$-202128-$SEP$-202129-$SEP$-202130-$SEP$-2021$

CONTRACT$-$I CONTRACT$-$II $17500$CE $17600$CE $434\mathrm{.}70359\mathrm{.}35443\mathrm{.}35365\mathrm{.}95352\mathrm{.}30279\mathrm{.}95317\mathrm{.}70247\mathrm{.}05234\mathrm{.}50173\mathrm{.}70$

STRIKE PRICE CONTRACT$-$III

$17700$CE $289\mathrm{.}65292\mathrm{.}45217\mathrm{.}20187\mathrm{.}15124\mathrm{.}10$

CONTRACT$-$IV $17800$CE $229\mathrm{.}40229\mathrm{.}30164\mathrm{.}70138\mathrm{.}40$

$83\mathrm{.}25$

CONTRACT$-$V $17900$CE $177\mathrm{.}85175\mathrm{.}60121\mathrm{.}85$

$99\mathrm{.}30$

$53\mathrm{.}25$

Q$13$a$.$ Calculate the payo from Strategy A and Strategy B if the lot size of the Nifty call option is $50.[2$ Marks$]$

CONTRACT$-$I Strategy A Long $1$

Strategy B

CONTRACT$-$II CONTRACT$-$III CONTRACT$-$IV Short $1$

Long $1$

CONTRACT$-$V

Short $1$

All positions were initiated on September $24,2021.$ The price at which trader goes long and short in various contracts are given below:CONTRACT$-$I CONTRACT$-$II Date $17500$CE $17600$CE

$24-$SEP$-2021420429\mathrm{.}8$

CONTRACT$-$III CONTRACT$-$IV $17700$CE $17800$CE

CONTRACT$-$V $17900$CE $233\mathrm{.}25$

Q$13$b$.$ What optimal strategy would you recommend to attain maximum prot? $[1$ Mark$]$

Q$13$c$.$ What is the maximum potential loss that an investor may incur from Strategy C$?[1$ Mark$]$

CONTRACT$-$I CONTRACT$-$II CONTRACT$-$III CONTRACT$-$IV Strategy C Long $1$ Long $1$

Assume that the trader enters into call options at indicated prices on September $24.$

CONTRACT$-$V

CONTRACT$-$V $17900$CE

CONTRACT$-$I Date $17500$CE

$24-$SEP$-2021420$

CONTRACT$-$II $17600$CE

CONTRACT$-$III CONTRACT$-$IV $17700$CE $17800$CE

$276$

The lot size of the Contract is $50.$

Q$13$d$.$ What are the intrinsic value and time value of money of the $17800$ Nifty call option? The Nifty $50$ index closing values are indicated below. The lot size of the Contract is $50.[2$ Marks$]$

Date $24-$SEP$-202127-$SEP$-202128-$SEP$-202129-$SEP$-202130-$SEP$-2021$

Nifty $50$ Index $($Close Price$)17853\mathrm{.}20$

$17855\mathrm{.}10$

$17748\mathrm{.}60$

$17711\mathrm{.}30$

$17618\mathrm{.}15$

Q$13$e$.$ Assuming the traded prices for Nifty put options are as follows:

Date $24-$SEP$-202127-$SEP$-202128-$SEP$-202129-$SEP$-202130-$SEP$-2021$

CONTRACT$-$I $17500$PE $73\mathrm{.}20$

$65\mathrm{.}95$

$82\mathrm{.}60$

$80\mathrm{.}00104\mathrm{.}85$

STRIKE PRICE

CONTRACT$-$II CONTRACT$-$III CONTRACT$-$IV $17600$PE $17700$PE $17800$PE $96\mathrm{.}10126\mathrm{.}05165\mathrm{.}35$

$87\mathrm{.}65116\mathrm{.}30153\mathrm{.}30108\mathrm{.}80147\mathrm{.}55192\mathrm{.}30108\mathrm{.}90149\mathrm{.}40199\mathrm{.}20143\mathrm{.}30191\mathrm{.}70253\mathrm{.}15$

CONTRACT$-$V $17900$PE $213\mathrm{.}75198\mathrm{.}85250\mathrm{.}70262\mathrm{.}05323\mathrm{.}15$

The corresponding call option prices are as specied earlier. The underlying index values are specied in $5$d$.$ Assume that NIFTY $17800$CE and $17800$PE options are correctly priced on September $24,2021.$ Find the most underpriced and overpriced options on September $24,2021.[2$ Marks$]$

Q$13$f$.$ What actions would you recommend to prot from mispricing in $5$e$.$ What is the prot from your strategy on subsequent days? $[2$ Marks$]\backslash$