16. The following is from an article titled "Analytic Uses Options to Protect Tenneco Posi- tion" that appeared in the November 16,1992, issue of Derivatives Week, p. 7: Analytic Investment Management in Irvine, CA., last Monday sold 70 Nov. 40 puts and bought 70 Feb. 35 puts on Tenneco for its Analytic Optioned Equity Fund derivatives-driven mutual fund, according to Chuck Dobson, the fund's executive v.p. By selling and buying an equal number of exchange-traded puts, the firm maintained a fully-hedged position while using profits on its options to counterbalance paper losses on the 7,000 Tenneco shares it owns for a net gain of 18 per option, Dobson said. Though Dobson could not give the price at which the stock was bought, he noted that since Tenneco was trading around $35 last Monday, the 7,000 shares were worth roughly $245,000, or about 0.27% of the total 591 million portfolio. Dobson explained that the firm takes a mondi- rectional approach to picking stock, relying instead on the stocks volatility, option premium and dividends. Dobson explained that the fund, which contains 130140 mostly high capitalization stocks, is governed by four basic derivatives-linked strategies. (1) buy a stock and sell a call on the stock: (2) buy a stock and a put on the stock: (3) sell a put and place the exercise price in a cash reserve fund, and (4) buy a call and place the exercise price in a morey market fund. a. Explain the option strategy cited in the first paragraph of this excerpt. Be sure to explain what Mr. Dobson meant by the "firm maintained a fully-hedged position." b. Explain the first two strategies listed in the third paragraph