Consider options on Microsoft stock. Suppose that there are call options with a strike price of $10 and put options with a strike price of $10, both with the expiration date of January 16th. Suppose that there is a 50% chance that the stock price will be $13 on January 16th (Scenario A) and another 50% chance that it will be $9 on January 16th (Scenario B). Answer the following:
A) Compute the gross profit (i.e. disregarding option premium) of the call option and of the put option on January 16th under scenario A
B) Do the same for scenario B
Please answer all parts for scenario A and B as noted in each question