Q$5.$ Draw a payoff diagram of a when you

a$)$ buy a call option with strike price $10.$ What is the value of the option at maturity if

the value of the underlying stock is $12?$

b$)$ buy a put option with strike price $10.$ What is the value of the option at maturity if the

value of the underlying stock is $12?$

c$)$ sell a call option with strike price $10.$

d$)$ sell a put option with strike price $10.$

e$)$ For each diagram $($a$)$ and $($b$)$ above, indicate where the option is in$-$the$-$money, at$-$the$-$

money, and out$-$of$-$the$-$money.

Q$6.$ On each of the diagrams above, draw a profit diagram, assuming that the option price is

$1($for all four cases$).$