1. HW No. 3 Due in class W FEB 24 p1 of 2
Study Chapters 8 and 10 in the text book and
answer the following problems:
Q ;
Q ;
Q – Do it all per share. Also, do only the first part of the problem. I.e., ignore the last sentence of the problem.
Q – for both spreads, show tables of cash flows and graph the P?L profiles.
Use the table of prices on the next page in order to solve Q5. – Q8 on the next page.

2. Q5. Consider the following strategy:
p2 of 2.
Q5. Consider the following strategy:
[Buy the stock and sell the APR, K=30 call]
Show the complete table of cash flow and the P/L at expiration.
Graph the P/L of the above strategy at expiration.
Q6. Consider the following strategy:
[Buy the OCT, K=25 put and sell the OCT, K=30 put]
a. Show the complete table of cash flow and the P/L at expiration.
b. Graph the P/L of the above strategy at expiration.
Q7. Consider the following strategy:
[Buy the APR K=32.5 put and sell the APR, K=30 put]
Q8. Consider the following strategy:
[Buy the stock and buy the APR K=20 put and sell the APR, K=35 call]
MMM; WED August S = 27.50 K
C A L L S - L A S T
P U T S - L A S T
SEP
OCT
JAN
APR 20
---
8.50
.35
1.00 25
3.50
3.80
.15
.50
27.5
1.35
.55 30
1.70
2.40
2.75
4.20
32.5
.45
.75
1.30
5.25
6.00 35
.05
7.30
8.85
9.50