Refer to Table 2.6 and look at the Microsoft options. Suppose you buy an August expiration call option with exercise price $285 and the stock price in August is $288.

Required:

a-1. Will you exercise your call?

a-2. What is the profit (loss) on your position?

b-1. If you had bought the August call with exercise price $280, will you exercise your call?

b-2. What is the profit (loss) on your position?

c-1. If you had bought the August put with exercise price $280, will you exercise your put?

c-2. What is the profit (loss) on your position?

Table 2.6

Stock options on Microsoft, July 14, 2021.

Expiration	Strike	Call	Put
6-August-2021	280	7.74	5.18
6-August-2021	285	5.06	7.48
6-August-2021	290	3.31	10.35
17-September-2021	280	10.97	8.59
17-September-2021	285	8.45	10.79
17-September-2021	290	6.22	13.98

Note: Microsoft stock price on this day was $ 282.51.

Source: Compiled from data downloaded from Yahoo! Finance.