On the 12th February the share price of ABC shares is 100p. The prices of the At-the-money Put and Call options on ABC shares are both 4p. (a) On two separate diagrams sketch the payoff profiles at Expiry of the long Call and the long Put. Your diagrams must show the equations of the Payoffs. [2] (b) Suppose you hold a long Call and a long Put. On the same diagram sketch the short-term and the At-Expiry Payoff profiles of the combined position. [3] Use the diagram or otherwise to obtain the Profit of the combined position when the Share Price at expiry rises to 110p and when it falls to 90p [2] Explain how the short-term profile will change if the Share price increases in volatility. [1] (d) (e) The delta, 8 of the At-the-money Call option is 0.5. Calculate the delta, 8 of the combined position. Hint: You may find the following relation helpful, SCALL = Oput + 1.121