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1. Tom buys 100 shares of Walker stock for $87.00 per share and a 3-month Walker put option with an exercise price of $105.00 for
1. Tom buys 100 shares of Walker stock for $87.00 per share and a 3-month Walker put option with an exercise price of $105.00 for $20.00. What is his dollar gain if at expiration the stock is selling for $80.00 per share?
2. D Corp stock currently trades at $50. August call options on the stock with a strike price of $55 are priced at $5.75. October call options with a strike price of $55 are priced at $6.25. Calculate the value of the time premium between the August and October options.
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