1. Imagine you are a Gamma executive with many Gamma shares which comprise a large portion of your portfolio. For tax reasons, you do not want to sell Gamma shares, but you are concerned about the consequences of a decline in the price of Gamma's shares. An advisor told you that you can alleviate your concern with a protective put or collar with Gamma options. a. Construct a protective put and a collar to alleviate your concern. (Use one share of Gamma in your exposition). b. For each position, show the profit diagram as of the April expiration date. At what Gamma share prices would you end up with more money than you would have had if you held only your Gamma shares? At what prices would you have less? 2. You can create a short Strangle by selling a Gamma, Inc. April put option with an exercise price of $50 and selling a Gamma, Inc. April call option with an exercise price of $55. a. Show the profit diagram as of the April expiration date. At what Gamma share prices at option expiration date would you have a profit? At what Gamma share prices at option expiration date would you have a loss? (Approximate prices are OK, but you must show your working out). b. You can create a short Straddle by selling a put and a call with the same exercise price. What can be the reason for constructing a Strangle rather than a Straddle. DATA Gamma Stock Price is $50.75 Gamma Options Prices: Option Call Premium Put Premium $0.38 April 45 $3.25 $2.19 April 50 $0.88 $4.88 April 55 April 60 $0.31 $9.50 April 65 $0.13