Construct profit diagrams or profit tables on expiration to show what position in IBM puts, calls and/or underlying stock best expresses the investors objectives described below. Assume IB currently sells for $150 so that profit diagrams / tables between $100 and $200 (in $10 increments as appropriate. Also assume that at the money puts and calls cost $15 each. Ignore dividends and interest.

a) An investor wants upside potential if IBM increases but wants (net) losses no greater than $15 if prices decline

b) An investor wants to capture profits if IBM declines in price but wans a guaranteed limited loss if prices increase

c) An investor wants to capture profits if IBM declines in price and is ready to accept unlimited losses if prices increase. Further, the investor wants to break even if the stock price does not change between now and the maturity of the options.

d) An investor wants to profit if IBMs upcoming earnings announcement is either unexpectedly good or disappointingly bad.