Consider 5 exchange-traded (Cboe), four month, $40 call option contracts to buy 100 shares per contract. How do the contracts change in terms of strike price and number of shares if the following happens: a) A ten percent stock dividend b) A ten percent cash dividend c) A four-for-one stock split A European put option to sell a share of stock for $140 costs $10 and is held until maturity. a) Under what circumstances will the BUYER of the option make a profit? b) Under what circumstances will the option be exercised? c) Draw a diagram illustrating how the profit from a long position in the option depends on the stock price at maturity of the option. (By hand or preferably excel) A European call option to buy a share for $36 costs $4 and is held until maturity. a) Under what circumstances will the seller of the option make a profit? b) Under what circumstances will the option be exercised? c) Draw a diagram illustrating how the profit from a short position in the option depends on the stock price at maturity of the option. a) Define in-the-money. b) For what values of the underlying asset is a call option in-the money? (Using K and ST ) c) For what values of the underlying asset is a put option in-the money? (Using K and ST ) Consider 5 exchange-traded (Cboe), four month, $40 call option contracts to buy 100 shares per contract. How do the contracts change in terms of strike price and number of shares if the following happens: a) A ten percent stock dividend b) A ten percent cash dividend c) A four-for-one stock split A European put option to sell a share of stock for $140 costs $10 and is held until maturity. a) Under what circumstances will the BUYER of the option make a profit? b) Under what circumstances will the option be exercised? c) Draw a diagram illustrating how the profit from a long position in the option depends on the stock price at maturity of the option. (By hand or preferably excel) A European call option to buy a share for $36 costs $4 and is held until maturity. a) Under what circumstances will the seller of the option make a profit? b) Under what circumstances will the option be exercised? c) Draw a diagram illustrating how the profit from a short position in the option depends on the stock price at maturity of the option. a) Define in-the-money. b) For what values of the underlying asset is a call option in-the money? (Using K and ST ) c) For what values of the underlying asset is a put option in-the money? (Using K and ST )