You would like to speculate on a rise in the price of a certain stock. The current stock price is $30 and a 3-month call with a strike price of $31 costs $3. You have $9000 to invest. Identify two alternative investment strategies, one in the stock and the other in an option on the stock. (35 points)

a)Strategy 1 (stock):

Describe the strategy and fill the table

I) Would you buy or sell shares?

ii) How many shares?

Stock price (ST) in the market	$20	$25	$30	$31	$35	$40	$45
Profit from strategy 1

b) Strategy 2 (option):

Describe the strategy and fill the table

i) Would you buy or sell call options?

ii) How many options?

Fill the table. Remember 1 option = 100 shares

Stock price (ST) in the market	$20	$25	$30	$31	$35	$40	$45
Option value (Pay off)
Premium
Profit from strategy 2

c) Which strategy would you prefer? A or b Why?