1. An investor sells a European call on a share for $4. The stock price is $47, and the strike price is $50. Draw a diagram showing the variation of the investor's (selling the option) profit with the stock price at the maturity of the option.

2. What margin would be required for the investor selling the call option in question #1?

3. What is a covered call? Explain how the investor in question #1 could implement a covered call. What effect would this have on the investor's margin requirement?