Question 1 The ctitious GoToTheMoon company trades on the stock exchange under the symbol GZTM. In the options market, there is a chain of call and put options on G2TM that are actively traded. The table below shows the prices of G2TM on 20 May. Contract Type Symbol Price $ Strike 3 Stock G2TM 88 - Call option C80.G2 1 1.2 80 Call option C85.G2 5.6 85 Call option C90.G2 3.5 90 Call option C95 .G2 2.1 95 Call option C 100.G2 0.8 100 Put option P?0.G2 0.6 70 Put option P?5.G2 2.1 75 Put option P80.G2 3.8 80 Put option P85.G2 4.3 85 Put option P90.G2 4.8 90 (a) Identify which options are ln-The-Money and which are Out-of-The-Money. (5 marks) Investor A noticed that the number of GZTM followers on Mate and Tweeter had exploded in late Apr. He ran a forecasting model which predicted probabilities for the price of GZTM on 24 Jun, the expiry date of all the options listed above: G2TM Price $50 $75 $100 $150 $200 24-Jun 5% 10% 15% 40% 30% He was convinced that the price of GZTM will increase soon. So on 20 May he bought 1000 shares ofGZTM and 1000 units ofP80.GZ put options. (b) Calculate Investor A's expected value of his portfolio on 24 Jun. (10 marks) (c) Investor A was clearly very bullish on GZTM to buy so much stock. Yet, he included P8062 put options in the portfolio. Explain his reason for doing so. (5 marks) (d) Recommend what Investor A can do to further enhance the return of his strategy