5. ) A call option on an S&P 500 futures contract has an exercise price of 1490; the call premium is currently $6.50. On the same date, a put option on the S&P 500 futures contract has an exercise price of 1490; the put premium is currently $7.50. The two options have the same expiration date.

1. Is the current index value greater than or less than 1490. How do you know?

2. Assume that the S&P 500 index is 1485 at expiration:

• Should the call option be exercised or should it be left to expire? What is the net ($) gain or loss after accounting for the premium paid to purchase the option?

• Should the put option be exercised or should it be left to expire? What is the net ($) gain or loss after accounting for the premium paid to purchase the option?