1. You purchase one crude oil July 70 call contract for a premium of $1.15 (per barrel). You hold the option until the expiration date when crude oil sells for $67.50 per barrel. You will realize a _____ (x gain or loss) on the investment. (Hint: Assume that each call covers 1,000 barrels)

2. You purchase one crude oil Sep 75 put contract for a premium of $3.10 per barrel. The maximum profit that you could gain from this strategy is __________. (Hint: Recall that each put covers 1,000 barrels.)

3. An investor purchases a long crude oil call at a price of $1.35. The exercise price is $80.00. If the current spot price of crude is $74.60, what is the break-even point for the investor? (Hint: Break-even point is the oil price at which the investor will have exactly zero profit or loss. Be sure to consider the effect of the option premium.)

4. A crude oil put option has an exercise price of $45 when its spot price is $46.75. If the put option is trading at $0.63, what is its time value?

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