1. Consider the Microsoft Corporation Stock that is currently trading at $334.

a. The cover call is 26.57, exercise is $330 and expiration the stock trades at $342. What is the investors (profit) (loss)? What is the maximum profit from the transaction? What is the breakeven stock price at expiration from the transaction? What is the maximum loss from the transaction?

b. Now suppose the protective put was 11.20 (long the stock, long the put) position with exercise price of $320. At expiration the stock is $270. What is the investors (profit) (loss)? What is the maximum profit from the transaction? What is the breakeven stock at expiration for the transaction? What is the maximum loss from the transaction?

c. Now consider a bull money spread using the Feb 16, 2024, 400/300 calls (Microsoft Corporation Stock). How much will the spread cost? What is the maximum profit from the transaction? What is the breakeven stock price at expiration from the transaction? What is the maximum loss from the transaction? What is the profit if the stock price at expiration is $470?

d. Consider a bear spread using the June 350/320 puts. How much will the spread cost? What is the maximum profit from the transaction? What is the breakeven stock price at expiration for the transaction? What is the maximum loss from the transaction?

Answer part (e) and (f) by assuming that the investor uses a long straddle using the Feb 16, 2024, $400 options.

e. What will the straddle cost? What are the two breakeven stocks at expiration? What is the profit if the stock price at expiration is at $360? What is the maximum profit from the transaction? What is the maximum loss from the transaction?

f. Calculate the break - even volatility for this straddle and interpret the number.

g. Using information in parts a and b, construct a collar strategy using Microsoft numbers. What is the maximum profit from the transaction? What is the maximum loss from the transaction?

h. Consider a butterfly spread option position on Microsoft by buying $400/$350 calls and selling two $375 calls. What is the maximum profit from the transaction? What is the breakeven stock price at expiration for the transaction? What is the maximum loss from the transaction?