• Your uncle owns 10,000 shares of Walmart stock. He is concerned about the short-term outlook for Walmarts stock due to an impending "major announcement." This announcement has received much attention in the press so he expects the stock price will change significantly in the next month but is unsure whether it will be a profit or a loss. He hopes the price will increase, but he also doesnt want to suffer if the price were to fall in the short term. His broker recommended he buy a "protective put" on the stock, but your uncle has never traded options before and is not much of a risk taker. He wants you to devise a plan for him to capitalize if the announcement is positive, but to still be protected if the news causes the price to drop. You realize that a protective put will protect him from the downside risk, but you think a straddle may offer similar downside protection while increasing the upside potential. You decide to show him both strategies and the resulting profits and returns he could face from each. Find quotes on options that expire on May 12, May 19, May 26, and June 2, 2023 for Walmart from Yahoo Finance. See this video on how to access the data: Access Option Data on yahoo For each expiry date, determine your uncles profit and return using the protective put. Identify the expiring put with an exercise price closest to, but not below, the current stock price (the current stock price is the price at the time when you download the data). Determine the dollar investment required to protect all 10,000 shares. Determine the put value at expiration for each stock price at $5 increments within a range of $40 (i.e., current stock price +/- 5, +/-10, +/-15 and +/-20). [Equation 2] Compute the profit (or loss) on the put option for each stock price used in part (b). Compute the profit (or loss) on the stock for each stock price used in part (b). Compute the overall profit (or loss) on the protective put (i.e., combining the put and stock for each price used in parts (c) and (d)). Compute the overall dollar return on 10,000 shares with and without protective put. For each expiry date, determine your uncles profit and return using the straddle. Compute the investment your uncle would have to make to purchase the call and put with the same exercise price and expiration as the put option in Question 2, in order to cover all 10,000 of his shares. Determine the value at the expiration of the call and the put options at each $5 increment of stock prices within a range of $40 (i.e., current stock price +/- 5, +/-10, +/-15 and +/-20). [Equations 1 and 2] Determine the profit (or loss) on the options at each stock price used in part (b). Determine the profit (or loss) on the stock from the current price for each stock price used in part (b). Compute his overall profit (or loss) of the stock plus straddle (i.e., combining the position in both options and his stock for each price used in parts (c) and (d)). Compute the overall dollar return on 10,000 shares with and without straddle. Was the broker correct that the protective put would prevent your uncle from losing if the announcement caused a large decrease in the stock value? What is your uncles maximum possible loss using the protective put? What is the maximum possible loss your uncle could experience using the straddle? Which strategy, the protective put or the straddle, provides the maximum upside potential for your uncle? Why does this occur? Equation 1: C = max (S - K, 0) Equation 2: P = max (K - S, 0)