On February 2021, Emilia has entered a bull call strategy for 6 months. Exercise price for AAA stock was RM25/share and exercise price for BB stock was RM12/share. The premium of the calls RM3/share and RM1.50/share. She expecting the cash price will increase in the middle of the year as she will locked at higher selling price rather than the buying price. Unfortunately, at the end of May 2021 the government announced for the lock down for two months starting in June 2021 as the Covid 19 cases has increased rapidly. In June 2021, AAA stock price declined to RM18/share while BB stock declined by 40%. Her options contract has remaining one month to maturity. She in dilemma either to let the option without exercise or to close out the positions. Required:

a. What is the rational for Emilia enter this strategy?

b. Determine the exercise price and the premium for the combination of two strategies in this bull call strategy. Why the exercise one of the calls is higher than the exercise of another call in this bull call strategy?

c. Calculate how much is the profit loss occurred in June 2021. (Support your answer by three diagrams and indicate the area of ITM, ATM and OTM)

d. What would be happened if the market price increase for both stocks before the maturity of the contract? Is she will profit? Justify.