Question
On the last day of October, you are considering the purchase of 100 shares of A Corporation common stock selling at $37 1/2 per share
On the last day of October, you are considering the purchase of 100 shares of A Corporation common stock selling at $37 1/2 per share and also considering an A Corporation option.
Calls
Puts
Price
December
March
December
March
35
3 3/4
5
1 1/4
2
40
2 1/2
3 1/2
4 1/2
4 3/4
a.If you decide to buy a March call option with an exercise price of 35, what is your dollar gain (loss) if you close your position when the stock is selling at 43 1/2? Why?
b.If you but a December put option with an exercise price of 40, what is the gain/loss if you close position when stock is trading at $33.5? Why?
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