Assume the FBM KLCI option index (OKLI) is currently at 1,585 points. You long five contracts August 1,585 OKLI call option at a premium of 15.0 index points and long another five contracts August 1,585 OKLI put option at a premium of 15.0 index points as well. Assume there are 35 days to expiry.

i) Identify the common name of these two combined positions. (2 marks)

ii) Sketch the pay-off diagram of this combined positions. Your diagram should include the components of the two strategies (the long call and the long put lines) as well as the line representing the overall strategy. Clearly label your diagram. (10 marks)

iii) Demonstrate the range of indexes point position levels that are in-the-money (ITM) based on the pay-off diagram in sub-question (ii) above. (4 marks)

iv) Calculate the amount of possible maximum total losses in Ringgit Malaysia (RM) that may incurred under these combined positions. State the index point level where this maximum loss triggered based on the pay-off diagram in sub-question (ii) above. (4 marks)