Consider options on the TSLA stock. Let = $300, =20%, =10%, =0%, and =1. Suppose you write an at-the-money straddle. (Solve the Question Using Black-Scholes Equation) a. What is the net cost of writing the straddle?

b. Suppose you want to hedge the downside risk in the straddle by adding a strangle (i.e., butterfly spread) with =$30050. How much does it cost to implement the butterfly spread?

c. How does your answer in part (b) change if the TSLA suddenly starts to pay a 5% continuous dividend?

d. Compute the delta of the butterfly spread in part (c).