Question 1:

Use the given information to answer the following scenarios:

The following option prices were observed for a stock (non-dividend) for July 6 of a particular year.

The stock is priced today at $165.13 per share. Assume interest rate=0%

The options are European.

In the following scenarios, determine the profits for possible stock prices of $150, 155, 160, 165, 170, 175, and 180.

	Call Premium		Put Premium
Strike	Aug.	Oct.	Aug.	Oct.
$165	$5.25	$8.10	$4.75	$6.75

A.) Buy one August 165 call contract. Hold it until the option expires. Determine the profits and graph the results. Then identify the break-even stock price at expiration. What is the maximum possible loss on this transaction?

B.) Buy one August 165 put contract. Hold it until the option expires. Determine the profits and graph the results. Then identify the break-even stock price at expiration. What is the maximum possible loss on this transaction?

C.) Short one October 165 put contract. Hold it until the option expires. Determine the profits and graph the results. Identify the break-even stock price at expiration. What is the maximum gain and loss on this transaction?

D.) Short one October 165 call contract. Hold it until the option expires. Determine the profits and graph the results. Then identify the break-even stock price at expiration. What is the maximum possible loss on this transaction?