Disregarding option premium

Reference no: EM13698906

Consider options on Microsoft stock. Suppose that there are call options with a strike price of $10 and put options with a strike price of $10, both with the expirations date of January 16th. Suppose that there is a 50% chance that the stock price will be $13 on January 16 (scenario A) and another 50% change that it will be $9 on January 16th (Scenario B). Answer the following:

A) Compute the gross profit (ie disregarding option premium) of the call option and of the put option on January 16th under scenario A

B) Do the same for scenario B

Reference no: EM13698906

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