Refer to the stock options on Microsoft in the Figure 2.10.

Suppose you buy a November expiration call option on 100 shares with the excise price of $140.

FIGURE 2.10 Stock options on Microsoft, September 4, 2019

Expiration	Strike	Call	Put
27-September-2019	130	8.65	1.03
27-September-2019	135	4.82	2.17
27-September-2019	140	1.99	4.35
15-November-2019	130	11.50	3.55
15-November-2019	135	8.12	5.15
15-November-2019	140	5.32	7.40

Note: Microsoft stock price on this day was $137.49. Source: Compiled from data downloaded from Yahoo! Finance.

a-1. If the stock price in November is $142, will you exercise your call?

• Yes or No

a-2. What is the net profit/loss on your position?

a-3. What is the rate of return on your position?

b-1. Would you exercise the call if you had bought the November call with the exercise price $130?

• Yes or No

b-2. What is the net profit/loss on your position?

b-3. What is the rate of return on your position?

c-1. What if you had bought an November put with exercise price $140 instead? Would you exercise the put at a stock price of $140?

• Yes or No

c-2. What is the rate of return on your position?