At the beginning of February 2020, you purchased June vanilla European calls with strike $65 on Intel (NASDAQ: INTC), which is due to expire today (June 4) and notice-to-exercise must be made by 5pm. At the time of purchase, the stock was trading at $58/share. After the purchase, you documented the stocks movements: after slowly gaining strength from February through to April to reach a 52-week high of $68.49 at the beginning of April, the stock kept falling and closed at $51 yesterday. The stock has a volatility of 30% p.a., and pays a dividend yield of 2.51% p.a.c.c. The risk-free rate of interest is 3% p.a.c.c.

a) Explain your market view on the underlying stocks at the time of your trade in February. (2 marks)

b) What is the moneyness of the option when you made the trade in February and does it have any intrinsic value? (2 marks)

d) As in part (c), you time travelled back to February. This time, you are free to enter any position (or multiple positions) in the stock and/or any derivatives learned in this course. What kind of positions and instruments would you trade to earn the highest profit with the lowest cost? You may choose any time to maturity for the instruments and you may choose any strike/delivery price between $49 and $69. You must enter all positions on the same day in early February when the stock was trading at $58/share; but you may exit any of these positions between that starting date in February and today, as long as all positions are closed out or expire by today (June 4). Explain your rationale in clear but brief points and include calculation. (8 marks)