You have strong reasons to believe two fundamental analysts' forecasts. One is of the opinion that UNI share price would increase and the other believes that the share price would decline by the close of the financial year owing to uncertainty in interest rates. You wish to sell your shares just before the close of the financial year to reap advantage of another dividend payout, which is almost a certain event.

You have so far made an unrealized profit, having bought the shares at $20 on March 1 2020. Today is the end of April. UNI stock volatility is 25%, and currently trading at $24.5.

The table below shows calls and puts on the stock with expiry at the end of June (end of financial year).

Strike Call Put

23.0 2.02 0.35

23.5 1.67 0.49

24.0 1.36 0.68

24.5 1.09 0.91

25.0 0.85 1.17

25.5 0.66 1.47

A. What would be the cheapest method to secure as much unrealized profits as possible by the use of these options, given the likely price movements of the stock? You are also required to work out the break-even point.

B. Demonstrate, using some of the options data above, how writing a naked put is similar to holding a synthetic covered call position.

C. Identify two purposes for creating a synthetic option.