You take a speculative position in two options. You SELL a call option and you sell a put option on firm ABC. The call option has a strike price of $50 and you receive a premium of $4. The put option also has a strike price of $50 and you receive 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 ABC:

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