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?