Find investment strategies using Microsoft puts, calls and/or underlying stock, which best express the investors objectives described below. Construct the profit diagrams and tables, in $10 increments, if the price of Microsoft at expiration falls between $50 and $150. Assume Microsoft currently sells for $100, and that at the money puts and calls (i.e., with an exercise price of $100) cost $10 each. As usual, the profit calculations ignore dividends and interest.

1. An investor wants to capture profits if Microsoft declines in price but wants loss no greater than $10 if prices increase. Only one transaction is permitted.

2. An investor just bought Microsoft for $100 and wants to protect against price declines but wants to retain upside if prices rise. Only one additional transaction is permitted here.

3. An investor wants upside potential if Microsoft increases but wants (net) losses no greater than $10 if prices decline. Only one transaction is permitted.