Question 6: (Lecture 11)

a) If you buy an option to buy Treasury futures at 115, and at expiration the market price is 110, then:

1) the call will be exercised.

2) the put will be exercised.

3) the call will not be exercised.

4) the put will not be exercised.

Explain your answer(s).

b) If you buy an option to buy Treasury futures at 110, and at expiration the market price is 115, then:

1) the call will be exercised.

2) the put will be exercised.

3) the call will not be exercised.

4) the put will not be exercised.

Explain your answer(s).

c) If you buy an option to sell Treasury futures at 110, and at expiration the market price is 115, then

1) the call will be exercised.

2) the put will be exercised.

3) the call will not be exercised.

4) the put will not be exercised.

Explain your answer(s).