Consider the following positions on the Intel stock. For each of the positions choose the strike X = $37. Choose the December option.

a. Short 1 call.

b. Short 1 put.

c. Short 1 call + long 1 put.

d. Long 1 call + long 1 put.

e. Long 1 call with strike $37 and short 1 call with strike $38.

f. Long 1 put with strike $36, short 2 puts with strike $37, and long 1 put with strike $38.

Assume that you enter and close the positions at the midpoint of the bid-ask spread.

Assume that you trade each contract on October 31 (i.e. enter the positions). For each position (a-f) answer the following questions:

1. Close out your positions on November 7. Calculate your net dollar gain or loss.

2. Now assume that you exercise options on November 7. For each position compute your net gain or loss.

3. For each position draw the payoff diagram, marking the strikes and the stock price on November 7 clearly, as well as your payoff.

data:

October 31

INTC (INTEL CORP)		36.2 +0.81
Calls	Last Sale	Net	Bid	Ask	Vol	Open Int	Maturity Strike	Puts	Last Sale	Net	Bid	Ask	Vol	Open Int
	2.00	+0.395	1.95	2.02	375	18460	23 Nov 35.00		0.51	-0.265	0.51	0.52	523	14558
	1.32	+0.275	1.28	1.34	754	16891	23 Nov 36.00		0.84	-0.36	0.82	0.86	1790	6220
	0.82	+0.205	0.8	0.82	690	19102	23 Nov 37.00		1.36	-0.42	1.31	1.36	169	5727
	0.47	+0.135	0.43	0.46	1,507	9337	23 Nov 38.00		2.28	-0.225	1.93	2.04	3	3848
	2.68	+0.375	2.67	2.7	358	7716	23 Dec 35.00		1.07	-0.245	1.05	1.06	4602	7771
	2.07	+0.325	2.04	2.08	992	15680	23 Dec 36.00		1.43	-0.325	1.43	1.45	508	18534
	1.54	+0.26	1.52	1.56	752	8412	23 Dec 37.00		1.9	-0.4	1.9	1.92	334	3070
	1.12	+0.215	1.09	1.12	2997	23543	23 Dec 38.00		2.92	+0.0	2.46	2.51	0	2338

November 7

INTC (INTEL CORP)		38.82 +0.82
Calls	Last Sale	Net	Bid	Ask	Vol	Open Int	Maturity Strike	Puts	Last Sale	Net	Bid	Ask	Vol	Open Int
	3.85	+0.725	3.8	3.95	104	17885	23 Nov 35.00		0.06	-0.025	0.05	0.06	1,153	14905
	2.99	+0.78	2.87	2.97	100	16119	23 Nov 36.00		0.09	-0.075	0.08	0.09	2,175	5989
	1.93	+0.53	1.96	2.08	383	16750	23 Nov 37.00		0.18	-0.175	0.17	0.18	244	5950
	1.23	+0.465	1.22	1.26	2,103	9266	23 Nov 38.00		0.38	-0.345	0.38	0.39	1,609	4158
	4.29	+0.665	4.25	4.35	99	9539	23 Dec 35.00		0.32	-0.125	0.31	0.33	241	19222
	3.52	+0.665	3.4	3.5	107	16976	23 Dec 36.00		0.47	-0.185	0.45	0.48	1,879	19346
	2.69	+0.54	2.68	2.73	81	8911	23 Dec 37.00		0.7	-0.255	0.67	0.72	1,865	4223
	2.01	+0.445	2.01	2.05	528	28021	23 Dec 38.00		1	-0.355	1.01	1.04	590	2630