1. (Implied volatility) The following table is the snapshot of KOSP1200 option data after market close on October 11, 2019. The closing price of KOSPI200 index on that day is 271.30, and the risk-free interest rate (91-days CD rate) is 1.49% per annum. (Assume that the time to maturity is 5 weeks = 0.096 years.) Call option Price Put option Price KOSP1200 C 201911 212.5 60.10 KOSPI200 P 201911 212.5 0.02 KOSPI200 C 201911 215.0 54.10 KOSPI200 P 201911 215.0 0.02 KOSPI200 C 201911 217.5 51.60 KOSPI200 P 201911 217.5 0.02 KOSPI200 C 201911 220.0 48.35 KOSPI200 P 201911 220.0 0.02 KOSPI200 C 201911 222.5 46.65 KOSP1200 P 201911 222.5 0.03 KOSP1200 C 201911 225.0 44.15 KOSPI200 P 201911 225.00.03 KOSPI200 C 201911 227.5 41.65 KOSPI200 P 201911 227.5 0.04 KOSP1200 C 201911 230.0 39.20 KOSPI200 P 201911 230.0 0.05 KOSPI200 C 201911 232.5 36.65 KOSP1200 P 201911 232.5 0.06 KOSP1200 C 201911 235.0 34.15 KOSP1200 P 201911 235.0 0.08 KOSPI200 C 201911 237.5 30.40 KOSPI200 P 201911 237.5 0.09 KOSPI200 C 201911 240.0 32.50 KOSPI200 P 201911 240.0 0.12 KOSPI200 C 201911 242.5 26.70 KOSPI200 P 201911 242.5 0.15 KOSP1200 C 201911 245.0 24.25 KOSP1200 P 201911 245.0 0.19 KOSPI200 C 201911 247.5 21.85 KOSPI200 P 201911 247.5 0.26 KOSP1200 C 201911 250.0 20.45 KOSPI200 P 201911 250.0 0.34 KOSPI200 C 201911 252.5 19.70 KOSPI200 P 201911 252.5 0.48 KOSPI200 C 201911 255.0 16.30 KOSP1200 P 201911 255.0 0.66 KOSP1200 C 201911 257.5 15.95 KOSP1200 P 201911 257.5 0.89 KOSPI200 C 201911 260.0 13.10 KOSPI200 P 201911 260.0 1.20 KOSPI200 C 201911 262.5 11.00 KOSP1200 P 201911 262.5 1.62 KOSP1200 C 201911 265.0 9.19 KOSP1200 P 201911 265.0 2.18 KOSP1200 C 201911 267.5 7.41 KOSPI200 P 201911 267.52.89 KOSPI200 C 201911 270.0 5.81 KOSP1200 P 201911 270.0 3.79 KOSPI200 C 201911 272.5 4.41 KOSPI200 P 201911 272.5 4.90 KOSPI200 C 201911 275.0 3.24 KOSPI200 P 201911 275.0 6.22 KOSPI200 C 201911 277.5 2.31 KOSPI200 P 201911 277.5 8.19 KOSPI200 C 201911 280.0 1.56 KOSPI200 P 201911 280.0 9.80 KOSPI200 C 201911 282.5 1.04 KOSPI200 P 201911 282.5 11.55 KOSPI200 C 201911 285.0 0.65 KOSPI200 P 201911 285.0 13.75 KOSPI200 C 201911 287.5 0.39 KOSPI200 P 201911 287.5 20.30 KOSPI200 C 201911 290.0 0.23 KOSPI200 P 201911 290.0 18.00 KOSPI200 C 201911 292.5 0.13 KOSP1200 P 201911 292.5 25.90 KOSPI200 C 201911 295.0 0.08 KOSP1200 P 201911 295.0 27.45 KOSPI200 C 201911 297.5 0.04 KOSPI200 P 201911 297.5 29.80 KOSPI200 C 201911 300.0 0.02 KOSPI200 P 201911 300.0 32.30 KOSPI200 C 201911 302.5 0.01 KOSP1200 P 201911 302.5 33.25 KOSPI200 C 201911 305.0 0.01 KOSP1200 P 201911 305.0 35.30 KOSPI200 C 201911 307.5 0.01 KOSP1200 P 201911 307.5 38.25 KOSPI200 C 201911 310.0 0.01 KOSP1200 P 201911 310.0 40.75 KOSPI200 C 201911 312.5 0.01 KOSPI200 P 201911 312.5 43.25 KOSPI200 C 201911 315.0 0.01 KOSPI200 P 201911 315.0 45.75 KOSP1200 C 201911 317.5 0.01 KOSP1200 P 201911 317.5 44.80 Volatility smile for call options 0.50 0.45 0.40 0.35 Implied volatility 0.30 0.25 0.20 0.15 220 240 280 300 320 260 Strike price Volatility smile for put options 0.40 1 W 0.35 0.30 Implied volatility 0.25 0.20 0.15 220 240 280 300 320 260 Strike price (b) Based on the graph shapes, give your expectation about future market direction. Then describe your investment strategy using options only. For example, you can construct bear market spread position by buying a put option of strike 240.0 and selling a put option of strike 220.0. 1. (Implied volatility) The following table is the snapshot of KOSP1200 option data after market close on October 11, 2019. The closing price of KOSPI200 index on that day is 271.30, and the risk-free interest rate (91-days CD rate) is 1.49% per annum. (Assume that the time to maturity is 5 weeks = 0.096 years.) Call option Price Put option Price KOSP1200 C 201911 212.5 60.10 KOSPI200 P 201911 212.5 0.02 KOSPI200 C 201911 215.0 54.10 KOSPI200 P 201911 215.0 0.02 KOSPI200 C 201911 217.5 51.60 KOSPI200 P 201911 217.5 0.02 KOSPI200 C 201911 220.0 48.35 KOSPI200 P 201911 220.0 0.02 KOSPI200 C 201911 222.5 46.65 KOSP1200 P 201911 222.5 0.03 KOSP1200 C 201911 225.0 44.15 KOSPI200 P 201911 225.00.03 KOSPI200 C 201911 227.5 41.65 KOSPI200 P 201911 227.5 0.04 KOSP1200 C 201911 230.0 39.20 KOSPI200 P 201911 230.0 0.05 KOSPI200 C 201911 232.5 36.65 KOSP1200 P 201911 232.5 0.06 KOSP1200 C 201911 235.0 34.15 KOSP1200 P 201911 235.0 0.08 KOSPI200 C 201911 237.5 30.40 KOSPI200 P 201911 237.5 0.09 KOSPI200 C 201911 240.0 32.50 KOSPI200 P 201911 240.0 0.12 KOSPI200 C 201911 242.5 26.70 KOSPI200 P 201911 242.5 0.15 KOSP1200 C 201911 245.0 24.25 KOSP1200 P 201911 245.0 0.19 KOSPI200 C 201911 247.5 21.85 KOSPI200 P 201911 247.5 0.26 KOSP1200 C 201911 250.0 20.45 KOSPI200 P 201911 250.0 0.34 KOSPI200 C 201911 252.5 19.70 KOSPI200 P 201911 252.5 0.48 KOSPI200 C 201911 255.0 16.30 KOSP1200 P 201911 255.0 0.66 KOSP1200 C 201911 257.5 15.95 KOSP1200 P 201911 257.5 0.89 KOSPI200 C 201911 260.0 13.10 KOSPI200 P 201911 260.0 1.20 KOSPI200 C 201911 262.5 11.00 KOSP1200 P 201911 262.5 1.62 KOSP1200 C 201911 265.0 9.19 KOSP1200 P 201911 265.0 2.18 KOSP1200 C 201911 267.5 7.41 KOSPI200 P 201911 267.52.89 KOSPI200 C 201911 270.0 5.81 KOSP1200 P 201911 270.0 3.79 KOSPI200 C 201911 272.5 4.41 KOSPI200 P 201911 272.5 4.90 KOSPI200 C 201911 275.0 3.24 KOSPI200 P 201911 275.0 6.22 KOSPI200 C 201911 277.5 2.31 KOSPI200 P 201911 277.5 8.19 KOSPI200 C 201911 280.0 1.56 KOSPI200 P 201911 280.0 9.80 KOSPI200 C 201911 282.5 1.04 KOSPI200 P 201911 282.5 11.55 KOSPI200 C 201911 285.0 0.65 KOSPI200 P 201911 285.0 13.75 KOSPI200 C 201911 287.5 0.39 KOSPI200 P 201911 287.5 20.30 KOSPI200 C 201911 290.0 0.23 KOSPI200 P 201911 290.0 18.00 KOSPI200 C 201911 292.5 0.13 KOSP1200 P 201911 292.5 25.90 KOSPI200 C 201911 295.0 0.08 KOSP1200 P 201911 295.0 27.45 KOSPI200 C 201911 297.5 0.04 KOSPI200 P 201911 297.5 29.80 KOSPI200 C 201911 300.0 0.02 KOSPI200 P 201911 300.0 32.30 KOSPI200 C 201911 302.5 0.01 KOSP1200 P 201911 302.5 33.25 KOSPI200 C 201911 305.0 0.01 KOSP1200 P 201911 305.0 35.30 KOSPI200 C 201911 307.5 0.01 KOSP1200 P 201911 307.5 38.25 KOSPI200 C 201911 310.0 0.01 KOSP1200 P 201911 310.0 40.75 KOSPI200 C 201911 312.5 0.01 KOSPI200 P 201911 312.5 43.25 KOSPI200 C 201911 315.0 0.01 KOSPI200 P 201911 315.0 45.75 KOSP1200 C 201911 317.5 0.01 KOSP1200 P 201911 317.5 44.80 Volatility smile for call options 0.50 0.45 0.40 0.35 Implied volatility 0.30 0.25 0.20 0.15 220 240 280 300 320 260 Strike price Volatility smile for put options 0.40 1 W 0.35 0.30 Implied volatility 0.25 0.20 0.15 220 240 280 300 320 260 Strike price (b) Based on the graph shapes, give your expectation about future market direction. Then describe your investment strategy using options only. For example, you can construct bear market spread position by buying a put option of strike 240.0 and selling a put option of strike 220.0