1. Laverne purchases a call option on XOM with a strike price of $90.00. XOM is already trading at $91.00 per share. Laverne pays a premium of $1.65 for the call, which expires in three months. If XOM stock rises to $103.00 per share and Laverne sells the call at a premium of $12.65, how much total profit will Laverne make on this transaction?

2. Shirley believes that Nike (NKE) stock is going to lose value due to declining demand for Nike clothing (Under Armor is taking over all of Nike's business). Shirley decides to buy a put option on NKE with a strike price of $90.00 and an expiration of six months. NKE is currently trading at $91.00. The premium over the put option is $1.60. NKE increases to $101.50 per share at the end of the six-month period. Shirley still has the put option at the end of the expiration period. Calculate Shirley's total gain or loss on this transaction at the expiration date.

3. Lenny decides he wants additional income, so he writes a call option on McDonald's stock (MCD) with a strike price of $95.00. MCD is currently trading at $92.00. Lenny charges a premium of $0.50 for the transaction. If MCD stock rises to $110.00, what will be the result for Lenny?

4. Squiggy writes a put option on Home Depot (HD) stock. The stock is currently trading at $108.00 per share. Squiggy writes a put option with a strike price of $105.00 and a 6-month expiration. Squiggy charges a premium of $1.05. Assume the stock price collapses to $31.00 per share at the end of the expiration period (and results in a put option premium of $74.00). Calculate Squiggy's total gain or loss on this transaction.

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Certainly lets calculate the total profit or loss for each of these options transactions 1 Lavernes ... View the full answer