Use the information in the table to answer the following questions. Create one spread per question from the prices in the chart. Create only one option spread for each question. For example, if you were going to create a covered write you might want to buy 100 shares at $91 and write a May 100 call against it. Please use a different option than the example.

Calls Puts

May 85

$7.50

May 85

$1.50

1) Create a covered write position

a. At what point, do you start to lose money?

b. At what point to you make a maximum profit? What happens if the stock continues to increase?

c. Is this a low or high volatility spread? What does volatility mean?