1. You own a call option on Intuit stock with a strike price of $31. When you purchased the option, it cost $7. The option will expire in exactly three months' time.

a. If the stock is trading at $40 in three months, what will be the payoff of the call? What will be the profit of the call?

b. If the stock is trading at $25 in three months, what will be the payoff of the call? What will be the profit of the call?

c. Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration.

d. Redo c, but instead of showing payoffs, show profits.

2. You shorted a call option on Intuit stock with a strike price of $33. When you sold (wrote) the option, you received $4. The option will expire in exactly three months' time.

a. If the stock is trading at $47 in three months, what will your payoff be? What will your profit be?

b. If the stock is trading at $26 in three months, what will your payoff be? What will your profit be?

c. Draw a payoff diagram showing the payoff at expiration as a function of the stock price at expiration.

d. Redo c, but instead of showing payoffs, show profits.