Problem 5 In 1992 Warren Buffet tried to buy Coca-Cola shares (KO) at below market prices by writing out-of-the money put options. Let's replicate that strategy with Caterpillar (CAT) using today's prices. Suppose you would like to buy 100,000 shares of CAT at a price which is about 10% below the current market price by selling appropriate 21" June 2019 puts. a) Graph your payoff and profit diagrams at expiration of these options. b) Explain what will happen and compute profits and effective purchase cost in March 2018 in the following cases: 1) The price is $145.00 i) The price is $138.00 The price is $124.99 Problem 5 In 1992 Warren Buffet tried to buy Coca-Cola shares (KO) at below market prices by writing out-of-the money put options. Let's replicate that strategy with Caterpillar (CAT) using today's prices. Suppose you would like to buy 100,000 shares of CAT at a price which is about 10% below the current market price by selling appropriate 21" June 2019 puts. a) Graph your payoff and profit diagrams at expiration of these options. b) Explain what will happen and compute profits and effective purchase cost in March 2018 in the following cases: 1) The price is $145.00 i) The price is $138.00 The price is $124.99