Which steps are required to implement Position 1? A. Buy call options and write put options. B. Buy put options and write call options. C. Write put options and write call options. Question 10.2 (5 marks) Which steps are required to implement Position 2? A. Sell a near-dated put and buy a longer-dated put. B. Sell a near-dated call and buy a longer-dated call. C. Buy a near-dated call and sell a longer-dated call. Question 10.3 (5 marks) Based on Exhibit 1, the maximum profit from executing Position 3 using APR $45.00 options is: A. $38.15. B. $51.85. C. unlimited. Question 10.4 (5 marks) Based on Exhibit 1, the maximum profit of Strategy 1 is: A. $2.26. B. $2.74. C. $4.76. Question 10.5 (5 marks) Based on Exhibit 1, the breakeven share price of Strategy 2 is: A. $41.46. B. $43.54. C. $46.46. Question 10.6 (5 marks) Based on Exhibit 1, the maximum loss of Strategy 2 is: A. $1.46. B. $3.54. C. $6.46.

John Potter is an investment advisor at Asgard International Advisors, a US-based firm that provides advisory services to both multinational corporations and high-net-worth individuals. Potter and Siu discuss potential strategies for investing in Heavymetal Innovation Services (HIS). Potter gathers selected option data on HIS, presented in Exhibit 1. Exhibit 1. HIS Option Premiums for April Expiration Calls Strike Price Puts $6.20 $40.00 $1.46 $4.55 $42.50 $2.41 $3.25 $45.00 $3.60 $2.17 $47.50 $4.85 Siu asks Potter to explain the steps required to implement three derivative positions in HIS: Position 1 Synthetic short position Position 2 Short calendar spread Position 3 Long straddle Siu decides to acquire HIS shares at the current share price of $45.00. Potter and Siu then discuss the following potential strategies in HIS: Strategy 1 Construct a collar using HIS $42.50 and HIS $47.50 options. Strategy 2 Enter into a protective put with HIS $40.00 options