a. Consider a bullish spread option strategy using a call option with a $25 exercise price priced at $4 and a call option with a $40 exercise price priced at $2.50. If the price of the stock increases to $50 at expiration and each option is exercised on the expiration date, the net profit per share at expiration (ignoring transaction costs) is:
i. $8.50
ii. $13.50
iii. $16.50
iv. $23.50
b. A put on XYZ stock with a strike price of $40 is priced at $2.00 per share, while a call with a strike price of $40 is priced at $3.50. What is the maximum per-share loss to the writer of the uncovered put and the maximum per-share gain to the writer of the uncovered call?
Maximum Loss to Put Writer Maximum Gain to Call Writer
i. ........................................$38.00.............................................. $ 3.50
ii. ....................................... $38.00 .............................................$36.50
iii. .......................................$40.00 ..............................................$ 3.50
iv. .......................................$40.00............................................. $40.00