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2. Cryptocurrencies can be expensive to purchase and exhibit much volatility. Rather than an outright purchase of cryptocurrencies, Casey wants to enter into a trade

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2. Cryptocurrencies can be expensive to purchase and exhibit much volatility. Rather than an outright purchase of cryptocurrencies, Casey wants to enter into a trade that would cost less money. Casey considers buying a call AND selling a put with identical strike prices of $5,600 over the S&P Cryptocurrency Broad Digital Market Index (SPCBDM). a. Draw Casey's synthetic position A and completely label the graph. (Either draw each option separately and then combine into one graph, or in the single graph, draw the initial options with dotted lines and the synthetic position in a solid line.) b. Is this strategy likely to be cheaper for Casey than purchasing an outright long position in SPCBDM? Graph the long position in SPCBDM to support your answer. Casey ultimately decides to buy a call with strike-$5,600 and sell a put at strike=$5,200 over the SPCBDM. Does entering this trade by selling a put with strike$5,200 cost Casey more or less than entering it by selling a put with strike=$5,600? (Hint: If SPCBDM>$5,600, how would the deltas for the two puts differ and, therefore, what can be inferred about the difference in the two put prices?) Explain your logic. d. Draw Casey's synthetic position C in part c and completely label the graph. SHOW ALL WORK as was required in part a. Are SCPBDM and synthetic position A perfect substitutes? Are SCPBDM and synthetit position C perfect substitutes? Relate your answers to the Law of One Price (LOOP). f. If the SCPBDM price falls between $5,200 and $5,600, is Casey likely to be financially better off under synthetic position A or synthetic position C? Explain your answer. c. e. 2. Cryptocurrencies can be expensive to purchase and exhibit much volatility. Rather than an outright purchase of cryptocurrencies, Casey wants to enter into a trade that would cost less money. Casey considers buying a call AND selling a put with identical strike prices of $5,600 over the S&P Cryptocurrency Broad Digital Market Index (SPCBDM). a. Draw Casey's synthetic position A and completely label the graph. (Either draw each option separately and then combine into one graph, or in the single graph, draw the initial options with dotted lines and the synthetic position in a solid line.) b. Is this strategy likely to be cheaper for Casey than purchasing an outright long position in SPCBDM? Graph the long position in SPCBDM to support your answer. Casey ultimately decides to buy a call with strike-$5,600 and sell a put at strike=$5,200 over the SPCBDM. Does entering this trade by selling a put with strike$5,200 cost Casey more or less than entering it by selling a put with strike=$5,600? (Hint: If SPCBDM>$5,600, how would the deltas for the two puts differ and, therefore, what can be inferred about the difference in the two put prices?) Explain your logic. d. Draw Casey's synthetic position C in part c and completely label the graph. SHOW ALL WORK as was required in part a. Are SCPBDM and synthetic position A perfect substitutes? Are SCPBDM and synthetit position C perfect substitutes? Relate your answers to the Law of One Price (LOOP). f. If the SCPBDM price falls between $5,200 and $5,600, is Casey likely to be financially better off under synthetic position A or synthetic position C? Explain your answer. c. e

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