You purchase a call option on GE stock with a strike price of $25.00. GE is currently trading at $24.00. You pay a premium of $1.55 to purchase the option. GE stock goes up to $28.50. The new premium is $3.55. If you sell the call at this point, how much total profit will you make on this transaction (not counting fees or commissions)?

155.00

$200.00

$2.00

$355.00

Question 21 pts

Roger believes that AAPL stock will go up a lot in the next three months. AAPL stock is currently trading at $119.00 per share. Roger buys a call option on AAPL with a strike price of $125.00 and an expiration date in three months. The premium at the time Roger purchases the call is $0.50. Three months from now AAPL stock is trading at $89.00. Calculate Roger's gain or loss on this transaction.

Roger loses his $50 investment.

Roger gains $600.00 on the transaction.

Roger loses $30.00 on the transaction.

Roger loses $300.00 on the transaction.

Question 31 pts

Sammy buys a put option on CSCO with a strike price of $40.00 and an expiration of 6 months. CSCO is trading at $45.00 per share at the time of the transaction. The premium is $0.25. Three months after Sammy buys the put option, CSCO stock drops to $31.00 per share. The new premium is $9.10. At this point, Sammy sells the put option. Calculate Sammy's total gains / losses on this transaction.

Sammy gains $9.10.

Sammy gains $8.85.

Sammy loses $8.85.

Sammy gains $885.00.

Question 41 pts

Larry sees that DIS stock is trading at $90.00. Larry writes (sells) a naked call on DIS with a strike price of $92.00. Larry collects a premium of $0.75 on the transaction. The stock price goes up to $106.00 by the expiration date of the option. Calculate Larry's total gains/losses on this transaction.

Larry gains $14.00 on the transaction.

Larry gains $13.25 on the transaction.

Larry loses $13.25 on the transaction.

Larry loses $1,325.00 on the transaction.

Question 51 pts

Alan bought 100 shares of MRK 4 years ago for $30.00 per share. Now MRK is trading at $60.00 per share. Alan writes a covered call on MRK with a strike price of $62.50. Alan collects a $1.75 premium on the call option he writes. MRK stock rises to $70.00 per share by the expiration date of the call. Which of the following most accurately describes Alan's total gains/losses for this transaction?

Alan gains $175.00 on the option sale and makes $3,250.00 on the sale of his stock.

Alan gains $175.00 on the option sale and makes $4,000.00 on the sale of his stock.

Alan gains $175.00 on the option and does not sell his stock.

Alan gains $1.75 on the option and $40.00 on the stock.

Question 61 pts

McLain owns 200 shares of CAT which he purchased 6 months ago at a price of $50.00 per share. CAT stock is now trading at $75.00 per share. McLain wants to lock in his profits for the next six months. McLain buys 2 put contracts on CAT with a strike price of $70.00 per share. McLain pays $0.90 premium for the options. If CAT stock drops all the way back to $50.00 per share (equalling a new premium on the put contract of $20.50), what will be the effect on McLain's earnings from this transaction?

McLain gains $1,960.00 on the transaction.

McLain gains $2,100.00 on the transaction.

McLain gains $3,920.00 on the transaction.

McLain gains $3,740.00 on the transaction.

Question 71 pts

Loretta believes that something drastic will happen to AMZN stock within the next three months. AMZN stock is trading at $370.00 per share. Loretta purchases both a put and a call contract on AMZN with strike prices equal to $370 (for both the put an the call). The premium on the put is $1.00 and the premium on the call is $0.75. How much does the stock price need to move (and in what direction) in order for Loretta to break even on this transaction?

AMZN must go down to $369.00 per share.

AMZN must go up to $370.75 per share.

AMZN must move at least $1.75 in either direction (up or down).

AMZN must increase a minimum of $1.00 per share.

Question 8

1 pts

Harry writes (sells) a put option on CAG with a strike price of $36.00. The stock is currently trading at $35.00. Harry collects a premium of $1.50 when he sells. If CAG goes down to $20.00 per share, what is the likely net result of this transaction?

Harry will gain $16.00.

Harry will gain $160.00.

Harry will gain $1,600.00.

Harry will lose $1,450.00