Stock prices

Strategy
$100 $110.00 $120.00 $130.00 $140.00
Plan A All stocks -20000 -10000 0 10000 20000
Plan B All options $0 $0 $0 $0 $0
Plan C Call Plus options $113,288 $113,298 $113,308 $113,318 $113,328

Payoffs & Profits

All stocks All options Call plus options
140000
120000
100000
80000
60000
40000
20000
0
$100 $110.00 $120.00 $130.00 $140.00
-20000
-40000
 No. of shares
Stock trading at $120 each 1000
120000 $120

Payoffs (St-X) ($100) Payoffs

Profit (Payoffs - Call premium) ($112) Profit
St (Stock price) $100 St (Stock price)
X (Exercise price) $200 X (Exercise price)
T (Expiration Date) 1 year T (Expiration Date)
C (Call premium) $12 C (Call premium)
Since the holder will incur loss if he exercises he will not go for the contract. Loss
Total loss will be $112

Rules Result Payoffs

Call= Market price>Exercise price In the money or profitable Profit
Put=Exercise price>Market price In the money or profitable St (Stock price)
X (Exercise price)
Rules Result T (Expiration Date)
Call= Market price<Exercise price Out of the money or not profitable C (Call premium)
Put=Exercise price<Market price Out of the money or not profitable Loss

T-bills strategy $113,400.00 Payoffs

Investment in call options $12,000 Profit
T-bills $108,000 St (Stock price)
Yield 5% $5,400.00 X (Exercise price)
Stocks in options 100 call options @ $120 each T (Expiration Date)
C (Call premium)
Payoffs ($100) Loss
Profit ($112)
St (Stock price) $100 Payoffs
X (Exercise price) $200 Profit
T (Expiration Date) 1 year St (Stock price)
C (Call premium) $12 X (Exercise price)
Call options + T-bills $113,288 T (Expiration Date)
C (Call premium)
Payoffs ($90) Loss
Profit ($102)
St (Stock price) $110
X (Exercise price) $200
T (Expiration Date) 1 year
C (Call premium) $12
Call options + T-bills $113,298

Payoffs ($80)
Profit ($92)
St (Stock price) $120
X (Exercise price) $200
T (Expiration Date) 1 year
C (Call premium) $12
Call options + T-bills $113,308

Payoffs ($70)
Profit ($82)
St (Stock price) $130
X (Exercise price) $200
T (Expiration Date) 1 year
C (Call premium) $12
Call options + T-bills $113,318

Payoffs ($60)
Profit ($72)
St (Stock price) $140
X (Exercise price) $200
T (Expiration Date) 1 year
C (Call premium) $12
Call options + T-bills $113,328
 ($90)
($102)
$110
$200
1 year
$12

$102

($80)
($92)
$120
$200
1 year
$12
$92

($70)
($82)
$130
$200
1 year
$12
$82

($60)
($72)
$140
$200
1 year
$12
$72