Roy constructs an options portfolio based on the MXC stock. He writes a call option with exercise price $74 and writes a put option with exercise price $70. Both options have the same expiration date.

MXC Call Option price $0.42

Exercise price $74

MXC Put $0.58 $70

1. Draw the payoff diagram of this portfolio at option expiration as a function of MXC stock price at that time. (4 marks)

2. What will be the profit/loss on this position if MXC is selling at $72 on the option expiration date? What if MXC is selling at $77? (6 marks)

3. At what two stock prices will Roy break even on his position? (4 marks)