1. Consider a call option with a strike price of $35 and maturity in December, and a put option with a strike price of $35 that also expires in December, both on a stock currently selling at $37 per share . Calculate how much money these options are in or out of.

2. Suppose that both a call and a put option are written on a stock with a strike price of $40. The current stock price is $42 and the buy and sell premiums are $3 and $0.75, respectively. Calculate the profit of both long and short positions for both sell and buy with a stock price of $30 on expiry and $45 at expiry.

Answer rating: 100% (QA)

For the call option If the stock price is below the strike price of 35 at expiration the call option will expire worthless Therefore the maximum amoun... View the full answer