1) Option trading strategy (8 marks)

Jacob bought one call option and one put option on FFC Corp shares. These two options have the same exercise volume and expiration date, but have different exercise prices. Both options are European options. Information on the options can be found in the table below:

a). What is the maximum loss of this trading strategy? Is there a maximum profit? Explain. (4 marks)

b). What is the profit/loss of this trading strategy if share price of FFC Corp is $15 at maturity? (1 mark)

c). At what share price(s) will Jacob break even on this trading strategy at maturity? (2 marks)

d). What must be Jacobs expectation of the share price of FFC Corp at expiration, given his investment strategy? (maximum 2 sentences) (1 mark)