3. A stock is currently trading at 80. There are one-month calls and puts on the stock with strike prices of 70, 75, 80, 85, and 90. The price and delta of each of these options is given below: Strike: 70 / 75 / 80 / 85 / 90

Call Price: 10.60 / 6.47 / 3.39 / 1.50 / 0.56

Put Price: 0.30 / 1.15 / 3.05 / 6.14 / 10.18

Call Delta 0.92 / 0.77 / 0.54 / 0.31 / 0.14

Put Delta: -0.08 / -0.23 / -0.46/ -0.69 / -0.86

For each of the following portfolios:

(a) Long 100 units of stock, short 100 units of the 80-strike call.

1. Find the current value of the portfolio

2. Find the approximate value of the portfolio following a $1 decrease in the stock price.

(b) Long 1000 units of the 80-strike call and 1174 units of the 80-strike put.

1. Find the current value of the portfolio

2. Find the approximate value of the portfolio following a $1 decrease in the stock price.

EXPLAIN