finance test

You are the VP of Finance for the wine manufacturer SIPP. Your company wants to reduce the volatility of its cash ows by making its cash ows less sensitive to changes in grape prices. It will do so by buying a call option on a grape ETF with a strike price $50 and buying aput option on a grapes ETF with a strike price of $50. Both options are American and expire in one year. Suppose that you sell the put, use the premium to pay for the call, and then decide to sell a callwith a strike price of Em. All the options are American with the same maturity date as the original portfolio. If grape prices hit $90 next month, what is the payoff of your option strategy? On Can 020