1. Several rumors concerning a stock are causing the market price of the stock to be quite volatile. Given this situation, you decide to buy both a one-month European $25 put and a one-month European $25 call on this stock. The call price per share is $.70 and the put price per share is $1.80. Contracts are on 100 shares. What will be your net profit or loss on these option positions if the stock price is $23 on the day the options expire? Ignore trading costs and taxes.
A. $20
B. -$10
C. $60
D. $50
E. $200
2. You sold five put contracts on CTB stock at an option price per share of $1.90. The options have an exercise price of $45 per share. The options were exercised today when the market price was $39 a share. What is your net profit or loss on this investment? Ignore transaction costs and taxes.
A. -$410
B. -$2,050
C. $3,000
D. $2,850
E. $3,950