3. Determine your uncle’s profit and return using the straddle.

a. Compute the investment your uncle would have to make to purchase the call and put with the same exercise price and expiration as the put option in Question 2, to cover all 10,000 of his shares.

b. Determine the value at expiration of the call and the put options at each $5 increment of stock prices within a range of $20 above and below Walmart’s current price using Eqs. 21.1 and 21.2.

c. Determine the profit (or loss) on the options at each stock price used in (b).

d. Determine the profit (or loss) on the stock from the current price for each stock price used in (b).

e. Compute his overall profit (or loss) of the stock plus the straddle; that is, combining the position in both options and his stock for each price used in (c)

and (d).

f. Compute the overall return of this position.