(a) Using a numeric example, illustrate and explain the pay-offs of a futures option

and a futures contract. (2 Marks)

(b) Explain and illustrate graphically the options concept of being:

(i) at the money (2 Marks)

(ii) in the money (2 Marks)

(iii) out of the money (2 Marks)

For both a call and put option.

(c) Explain with the aide of a diagram a protective put buying strategy. (2 Marks)