Given the relative lack of interest in silver in recent months, Joe Davola believes that silver price will continue to display low volatility in the coming months. Silver is trading at $35 in the spot market and pays no yield. a) Given his beliefs, which one of the following strategies makes sense for Mr. Davola? Note: Please, choose only one strategy and explain the reasons for your choice 1. A short (or, reverse) calendar spread 2. A long strangle 3. A Short straddle 4. A Bear spread using Calls b) To implement the chosen strategy, Mr Davola is considering an at-the-money call option, currently trading for an $8 premium, and an ATM put option with the same expiration as the call, which is available for a $5 premium. Construct a table that shows the profit from the strategy you chose in a) above.

c) For what range of stock prices would the strategy you chose in a) lead to a loss?