Question 2 (13 marks) Question 2 comprises multiple parts. Students are to answer ALL parts of this question: a) You had a lot of fun trading in options and currency and would now like to start trading in option spread strategies. The strategy you are most interested in is the reverse butterfly strategy using put options. You observe three put options on BBC Ltd. Put options with a strike price of $60 cost $8, put options with a strike price of $55 cost $5, and put options with a strike price of $50 cost $3. How would you create a reverse butterfly spread from puts using these options? Construct a table showing the profit from the strategy. For what range of stock prices would the strategy lead to a profit? (7 Marks) b) You have now decided to start trading in a strangle combination strategy. You have identified a put option on BBC Ltd with a strike price of $20 that costs $3, and a call option on BBC Ltd with a strike price of $30 and the same expiration date that costs $4. Construct a table that shows the profit from the strangle. Also, for what range of stock prices for BBC Ltd would the strangle lead to a loss? (6 Marks) Question 2 (13 marks) Question 2 comprises multiple parts. Students are to answer ALL parts of this question: a) You had a lot of fun trading in options and currency and would now like to start trading in option spread strategies. The strategy you are most interested in is the reverse butterfly strategy using put options. You observe three put options on BBC Ltd. Put options with a strike price of $60 cost $8, put options with a strike price of $55 cost $5, and put options with a strike price of $50 cost $3. How would you create a reverse butterfly spread from puts using these options? Construct a table showing the profit from the strategy. For what range of stock prices would the strategy lead to a profit? (7 Marks) b) You have now decided to start trading in a strangle combination strategy. You have identified a put option on BBC Ltd with a strike price of $20 that costs $3, and a call option on BBC Ltd with a strike price of $30 and the same expiration date that costs $4. Construct a table that shows the profit from the strangle. Also, for what range of stock prices for BBC Ltd would the strangle lead to a loss? (6 Marks)