You take a speculative position in two options. You buy a call option and you buy a put option on firm XYZ The call option has a strike price of $50 and you pay a premium of $4. The put option also has a strike price of $50 and you pay a premium of $4. Both options expire at the same time in three months from now.

1. You are betting that the stock price of XYZ:

A) Will remain fairly constant B) Will increase by a large amount C) Will decrease by a large amount D) Will move by a large amount in either direction

2. What is your maximum possible profit?

A) Unlimited B) $50 C) $42 D) $58 E) $8

3. Assume at expiration that ABCs stock price equals $60. Your profit or loss equals:

A) A loss of $8 B) A loss of $4 C) A loss of $2 D) A profit of $2 E) A profit of $8