QUESTION 2 (25 MARKS) (a) From your analysis, you expect the price movement of CT Berhad to be in short-term bullish when it reaches RM4.00. You are given the following information and state the best strategy for this scenario. (6 marks) CT November RM5 Put @ RM0.80 CT November RM3 Put @ RM0.30 Continued.... LLCHONG BEN3144 FINANCIAL DERIVATIVES 21 OCTOBER 2012 Fill in the table below and draw the payoff diagram. Label the break-even price, maximum profit and loss. (Assume 1 contract= 100 stocks; you trade 5 contracts) Premium Profit/Loss Stock Prices RM5.00 Put Premium @ RM0.80 RM3.00 Put@RM0.30 2.0 3.0 4.0 5.5 (13 marks) (b) Explain put-call parity function and write the function. If the function is violated, what strategy can be performed? (6 marks) QUESTION 2 (25 MARKS) (a) From your analysis, you expect the price movement of CT Berhad to be in short-term bullish when it reaches RM4.00. You are given the following information and state the best strategy for this scenario. (6 marks) CT November RM5 Put @ RM0.80 CT November RM3 Put @ RM0.30 Continued.... LLCHONG BEN3144 FINANCIAL DERIVATIVES 21 OCTOBER 2012 Fill in the table below and draw the payoff diagram. Label the break-even price, maximum profit and loss. (Assume 1 contract= 100 stocks; you trade 5 contracts) Premium Profit/Loss Stock Prices RM5.00 Put Premium @ RM0.80 RM3.00 Put@RM0.30 2.0 3.0 4.0 5.5 (13 marks) (b) Explain put-call parity function and write the function. If the function is violated, what strategy can be performed? (6 marks)