1. Determine your uncle’s profit and return using the protective put . 2. Determine your uncle’s…

1.Determine your uncle’s profit and return using the protective put.

2.Determine your uncle’s profit and return using the straddle. Was the broker correct in saying that the protective put would prevent your uncle from losing if the announcement caused a large decrease in the share value? Justify your answer. What is your uncle’s maximum possible loss using the protective put?

5.What is the maximum possible loss your uncle could experience using the straddle?

6.Which strategy, the protective put or the straddle, provides the maximum upside potential for your uncle? Why does this occur?

7. Suppose that your uncle informs you that he is now contemplating hedging his 10,000 share portfolio using futures contracts. Precisely explain and specifically detail the steps involved in hedging his share portfolio using futures contracts.
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