Problem $16-08$

In March, a derivatives dealer offers you the following quotes for June British pound option contracts $($expressed in U$.$S$.$ dollars per GBP$)$:

MARKET PRICE OF CONTRACT

Contract Strike Price Bid Offer

Call USD$1\mathrm{.}440\mathrm{.}06440\mathrm{.}0650$

Put $0\mathrm{.}02260\mathrm{.}0232$

Call USD$1\mathrm{.}480\mathrm{.}04370\mathrm{.}0443$

Put $0\mathrm{.}04040\mathrm{.}0410$

Call USD$1\mathrm{.}520\mathrm{.}02260\mathrm{.}0232$

Put $0\mathrm{.}06440\mathrm{.}0650$

Assuming each of these contracts specifies the delivery of GBP $31,300$ and expires in exactly three months, complete a table similar to the following $($expressed in dollars$)$ for a portfolio consisting of the following positions:

Long one $1\mathrm{.}48$ call

Short one $1\mathrm{.}52$ call

Long one $1\mathrm{.}44$ put

Short one $1\mathrm{.}48$ put

Do not round intermediate calculations. Round your answers to the nearest cent. Enter the net initial costs as negative values. Use a minus sign to enter negative values. If the answer is zero, enter $"0".$

June

USD$/$GBP Net Initial

Cost Long Call $1\mathrm{.}48$

Profit Short Call $1\mathrm{.}52$

Profit Long Put $1\mathrm{.}44$

Profit Short Put $1\mathrm{.}48$

Profit Total Net

Profit

$$1\mathrm{.}40$ $

$

$

$

$

$

$$1\mathrm{.}44$ $

$

$

$

$

$

$$1\mathrm{.}48$ $

$

$

$

$

$

$$1\mathrm{.}52$ $

$

$

$

$

$

$$1\mathrm{.}56$ $

$

$

$

$

$

Choose the correct graph of the total net profit $($i$.$e$.,$ cumulative profit less net initial cost, ignoring time value considerations$)$ relationship using the June USD$/$GBP rate on the horizontal axis.

The correct graph is

$-$Select$-$

$.$