17. Consider the following options portfolio. You write a February expiration call option on IBM with exercise price 105. You write a February IBM put option with exercise price 100.

a. Graph the payoff of this portfolio at option expiration as a function of IBM’s stock price at that time.

b. What will be the profit/loss on this position if IBM is selling at 103 on the option expiration date? What if IBM is selling at 110? Use The Wall Street Journal listing from Figure 20.1 to answer this question.

c. At what two stock prices will you just break even on your investment?

d. What kind of “bet” is this investor making; that is, what must this investor believe about IBM’s stock price to justify this position?