| In 1976 Australia established its first equity options market after Chicago in 1973. Some important aspects of option specification to note are the underlying parcel is 1,000 shares for stock options and 10 times the index level for index options. The prices are quoted in cents per share for stock options and points per contract for index options. The exercise requires the delivery of stock options and cash settlement for index options. You are a trader in the Australian stock market interested in owning shares in Xero Limited. XERO is a technology company based in New Zealand that offers cloud-based accounting software primarily to small and medium- sized businesses. It's one of the top technology stocks on the ASX and is widely regarded for its growth and market presence with over a million subscribers in Australia and New Zealand. Over the past five years, XERO'S stock price has peaked at $154 after rising from below $63. Recently, the stock price has fallen to $125. This case study explores the pricing of derivative contracts and the implications of price volatility on financial instruments particularly for XERO stock. Over the past year, Xero Stock has announced its new subscriber growth targets. The company plans to concentrate its capital allocation on diversifying its product mix. However, increasing competition in the Al industry has tempered its stock price performance, which is expected to exhibit minor volatility in the upcoming month. Convinced by the attractive PE ratio and the company's forthcoming plans for capital expenditure, you are interested in trading options on this stock with a minimal initial investment over this brief period. You have gathered the following data (refer to Table 2) on a European Call Option for this stock. Your strategy is to set up a Call Butterfly spread using three call options with identical expiration dates and evenly spaced strike prices. Create a Butterfly Spread. Showing the range of stock prices leads to profit from the strategy. Table 2: European Call Option, Expiration date 30th June 2023 Strike Price, K ($) Premium 42.45 4.45 44.00 5.55 41.25 6.00 50.25 2.20 45.00 3.75 38.50 4.00 36.55 5.60 48.75 2.25 48.15 3.00 39.00 3.80 38.45 4.10 (8 marks)