1.Avalon Corporation has beeb developing a new product for the past 5 years and the product is coming out next month. It is not clear whether the product will succeed or fail, however you believe the success or failure of the product will have a very dramatic impact on the price of the company. What would be a simple options strategy using a put and a call to exploit your conviction about the stock price's future movement?

Buy a put, write a covered call, buy a straddle, or buy a call.

2.You write one IBM July 100 put contract for a premium of $9. You hold the option until the expiration date when IBM stock is at $116 per share. How much profit or loss you will realize on the investment? Remember each contract has 100 shares.

3.You sell one Texas Instruments August 75 call contract for a premium of $9 and sell one Texas Instruments August 75 put contract for a premium of $9. You hold the position until the expiration date when Texas Instruments stock is at $57 per share. You profit or loss would be?

4.The current stock price of Sanders is at $35. A put on Sanders stock with a strike price of $35 is priced at $9 per share while a call with a strike price of $35 is priced at $11. If you implement a covered call strategy today and the stock price decrease to $32, what is your total profit or loss (assuming you implement the strategy using 100 shares)?

5.You buy one IBM July 90 call contract for a premium of $4 each share and one put contract for a premium of $2 each share. You hold the position until the expiration date when IBM stock sells for $97 per share. What is your total profit or loss? Remember each contract has 100 shares