Assume that the share price of Mulberry Ltd on October 26, 2020 is $45. Use the call and put option data provided in the table below to answer the following questions.

(Note: an options contract on shares in Australia is for 1,000 shares)

Required: i) Describe what is meant by a covered call option strategy and give two reasons why an investor might enter into such a strategy. (3 marks)

ii) Assume that an investor who owns 1,000 shares in Mulberry Ltd. decides to write December covered calls with a strike price of $46 over all 1000 shares. What would be the total value of the investors portfolio (the value of shares plus the profit or loss on the covered call option strategy) if the share price at expiry of the option is $50? (1 mark)

v) Construct a Long Call Butterfly Spread using December $43, $46, and $49 strike prices. Calculate the total profit (loss) from this position if Mulberrys share price at expiry is $47? (5 marks)

vi) Calculate the premium received for writing a March Strangle with exercise prices of $47 for the call and $43 for the put? Calculate the profit (loss) from this strategy if Mulberrys share price at the option expiry date is $55. (2 marks)

Strike Price December Calls December Puts March Calls March Puts $40 $1.36 $1.96 $42 $3.23 $0.85 $1.36 $1.70 $2.10 $2.62 $3.90 $43 $44 $2.33 $3.40 $2.73 $45 $2.96 $2.60 $2.10 $1.57 $1.21 $3.20 $3.73 $46 $3.14 $2.52 $2.10 $47 $48 $1.75 $0.92 $0.70 $49 $1.45