Assume the underlying asset for one share of option is one share of stock.

(a) Suppose you pay $1 for 1 share of a Call Option of GameCock stock. The strike price is $20. The GameCock stock is currently traded at $20 per share.

(1) What is your payoff and profit if the stock price goes up to $26? What is your percentage return on this investment?

(2) Draw the stock pricepayoff and profit relationship on a graph

(b) Consider the following investment: you buy 1 share of the Call Option of GameCock stock at $1 and 1 share of the Put Option of GameCock stock at $2 from Taylor Swift. The strike price for both the call option and the put option is $20.

(1) What is your payoff and profit if the stock price goes down to $15 at expiration? What is your return on this investment?

(2) Draw the stock priceyour payoff and profit relationship on a graph

(3) What is Taylor Swifts profit in dollar terms if the stock price goes up to $22 at expiration?

(4) What is your maximum loss in dollar terms?