1. Attachments A and B to this problem set are copies of the Option Chain for Microsoft Inc. (NYSE:MSFT) as of Friday, March 26. An option chain shows pricing quotes for options expiring on a particular date for a particular stock. (Options are usually bought or sold based on lots of 100 shares but quoted on a per share basis. For purposes of this question, assume that all transactions are on a per share basis.) Attachment A shows American MSFT options expiring April 1, 2021, and Attachment B shows American MSFT options expiring July 16, 2021. Answer the following questions based on your review of these attachments (noting that the Closing Price for MSFT on March 26 was $236.48 per share): a. If on March 26 you bought a July 16 MSFT 240 call option at the last trade price, and MSFT closes at $230 on July 16, where would you stand? What if MSFT closes at $260 on May 15? b. Compare the last trade prices of an April 1 and July 16 250 put option. What explains the difference? c. If you bought one share of MSFT on March 26 at its closing price and also bought one July 16 240 put option, whats your position on July 16 if MSFT closes at $220 that day? What if closes at $235? At $260?

Attachment B MSFT OPTION CHAIN Exercise Date: July 19, 2021 Calis Puts Ep. Date Last Change Bid Ask Volume Open it Strike last Change 80 Ask Volume Open it July 16, 2021 2051 25.60 12.50 5 151521500 625 0.801 555 387 1238 Jul 16 2291 +1214 2290 24.00 111 2180 22000 753 0811 680 721 88 3009 16 1900 +0801 19.45 2015 32 873 225.00 9.15 1351 825 89. 2559 16 16.90 +1551 15:35 1720 17 8785230.00 1050 1741 1005 10.60 30 2135 Ju 16 13:40 +0.601 13.70 14.05 63 149 235.00 13.65 -1001 1220 1270 13 16 1129 +41 11.15 1166 13103 24000 16.60 1451 1465 1535 15 1910 J16 361 +0511 885 9.40 18 1994 24500 16.60 +0.701 17.40 313 Jul 15 708 +0.81 7.05 750 113 2161 25000 22.88 +3084 2050 2130 1 231 16 500 0201 550 590 29 397425500 2.00 229 111 J 16 430 +0.2011 430 116 9748 25000 29.05 +3261 27.40 235 B 58 USTRESSFRX2001 -- Attachment A MSFT OPTION CHAIN Exercise Date: April 1, 2021 LAST TRADE: $236.48 (AS OF MAR 26, 2021) Puts En Date Last Chunge Ask Volume Open it Stre Change Bid Open Int April 01, 2021 1975 -2754 20.58 2225 6 421500 012 0.17: 012 0.14 180 1121 Art 1762 18.10 20.85 1 3221750 017 010 021 747 1706 16.40 0251 1585 86 240 220.00 021 717 1801 11.34 102 1490 15 80 m 023 003 031 983 1965 Art 11.55 11.35 1210 100 234 25.00 040 920 9.25 10:20 490 2250 -1.001 1992 7.00 700 760 1084 145 2000 0.77 -1451 077 4569 3811 for 11 5.10 49 5.30 3007 1925 282.50 125 105 199 2005 1592 315 32 345 1113 4829235.00 174 152 3504 3210 fort 199 187 200 349 23750 335 21 277 315 957 155 forli 0.94 021 0.90 1.00 10418 465 361 430 491 1199 1081 fort 3868 7.96 6.15 755 177 510 fort 021 0.051 0.18 021 2188 5220 3500 1123 120 90 517 158 fort 0.11 0.071 0.09 0.15 200 500 2005 1475 990 1220 25 009 0.06 0.09 2000 9997 25000 12.40 14.65 3 21 April 005 0.06 0.10 245 1480 25250 1935 1435 1665 7 005 0021 0.06 0.08 124 1534 25500 1990 17.75 1960 13 22 Art 0.04 0.04 0.06 727 25750 2110 1935 2 0.14 0.00 0.07 99728000 22.35 3