The market price of Southern Press stock has been relatively volatile and you think this volatility will continue for a couple more months

61.

You sold one call option contract with a strike price of $55 when the option was quoted at $0.80. The option expires today when the value of the underlying stock is $53.70. Ignoring trading costs and taxes, what is the net profit or loss on this investment?    A.  -$250 B.  -$80 C.  $0 D.  $50 E.  $80 Total profit = $0.80 × 100 × 1 = $80. The call finished out-of-the-money.

AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 24-01 The basics of call and put options and how to calculate their payoffs and profits. Section: 24.1 Topic: Call payoff

62.	You sold three $35 call option contracts at a quoted price of $1.40. What is your net profit or loss on this investment if the price of the underlying asset is $38.10 on the option expiration date?    A.  -$510 B.  -$90 C.  $90 D.  $510 E.  $930 Total loss = ($1.40 + $35 - $38.10) × 100 × 3 = -$510

AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 24-01 The basics of call and put options and how to calculate their payoffs and profits. Section: 24.1 Topic: Call payoff

63.

You wrote eight call option contracts with a strike price of $42.50 at a call price of $1.35 per share. What is your net gain or loss on this investment if the price of the underlying stock is $40.30 per share on the option expiration date?    A.  -$2,840 B.  -$1,760 C.  -$1,080 D.  $1,080 E.  $1,760 Net profit = $1.35 × 100 × 8 = $1,080. The call finished out-of-the-money.

AACSB: Analytic Blooms: Apply Difficulty: 1 Easy Learning Objective: 24-01 The basics of call and put options and how to calculate their payoffs and profits. Section: 24.1 Topic: Call payoff

64.

The market price of Southern Press stock has been relatively volatile and you think this volatility will continue for a couple more months. Thus, you decide to purchase a two-month European call option on this stock with a strike price of $45 and an option price of $2.00. You also purchase a two-month European put option on the stock with a strike price of $45 and an option price of $0.30. What will be your net profit or loss on these option positions if the stock price is $48 on the day the options expire? Ignore trading costs and taxes.    A.  -$30 B.  $70 C.  $80 D.  $270 E.  $330 Net profit = [(-$2.00 + $48 - $45) × 100] + [-$0.30 × 100] = $70