Diagram a protective put strategy (Please identify stock prices used, strike prices used, expiration dates used,

premiums paid and/or received and any other information needed to properly grade your response) [Worth 20

points]:

1

a. Show the maximum loss and identify that point on the graph. [1 point]

b. Show the maximum profit and identify that point on the graph. [1 point]

c. Show the breakeven stock price and identify that point on the graph. [1 point]

d. Diagram a-c above for a higher exercise price. [3 points]

e. Explain why a higher exercise price changes the numbers/points for a-c. [2 points]

f. Diagram a-c above for a lower exercise price. [3 points]

g. Explain why a lower exercise price changes the numbers/points for a-c. [2 points]

h. Explain a protective put, when you would want to use it and why. (Answer must be 25 words minimum

to get credit. [Worth 5 points]

i. Explain how and why a protective put is like buying insurance. [2 points]

2.

Explain in detail a collar option strategy. (Answer must be 100 words minimum to get credit. [Worth 20 points]

3. Explain in detail a straddle option strategy. (Answer must be 100 words minimum to get credit. [Worth 20

points]