The following is the data on a weather option:

Option type: CALL

Met Office: Chicago O'Hare International Airport

Underlying index: Heating Degree Days

Term: Nov. 1 - Mar. 31

Structure: Call option

Strike = 4500 HDDs

Tick size = $5,000 / HDD

Limit payoff = $1 million

Premium $180,000

a.On a graph, please plot the payoff (value) - that is, do not consider the premium - of the option on the expiration day as a function of the HDD Index for the period Nov 1 - Mar 31. Please mark the graph very carefully (the maximum payoff; the point(s) of kink; etc.)

b.Now please plot the option profit diagram (that is, consider the premium), again marking the graph very carefully.

c.What is the break-even level of the HDD index, i.e. the level at which the trader makes zero profit on the put?