Alvin has trade in options market for few years and he has a lot of experiences and knowledges about the options market. Currently, he plans to enter the long straddle and the short strangle. The price for following strategies as follows:

Long Call (A stock) & Long Put (B stock) exercise price: RM10; PM: RM1 & RM2 respectively

Short Call (C stock) & Short Put (D stock) exercise price: RM12; PM: RM2 for both

Long Call (E stock) & Long Put (F stock) exercise price: RM22 & RM18; PM: RM2 for both

Short Call (G stock) & Short Put (H stock) exercise price: RM21& RM17; PM: RM1.20 & 2.50

He plans to enter in November 2022 for 3 months contracts and for 2000 shares for each contract.

Required:

What is the objective he enters both strategies?

b. Assume after one-month, the KLCI shows declining 50 points and therefore, the market price decline by 51%. Will he exercise or do not nothing to his contracts? Justify with calculations and the reason(s) why he acts as above for both strategies.

c. Upon maturity, assume if the KLCI has shows the good indicator and the market is bullish. Assume the market prices increase by 15%, and is he will be ITM, ATM or OTM? Justify and proof by calculations and the reason(s).