5a. You buy a call option on ROCK stock with an exercise price of $103. Today, the stock’s price is $95. The premium on the call option is $3. Just before expiration, the stock’s price is $100. Will you exercise the option? What is your net profit or loss? What is the break-even price? (show your work) (2.5 points)
5b. You sell a put option on ROLL stock with an exercise price of $97. Today, the stock’s price is $95. The premium on the put option is $2. Just before expiration, the stock’s price is $98. Will the option be exercised? What is your net profit or loss? What is the break-even price? (show your work) (2.5 points)
5c. What is the maximum potential gain from selling a call option? Explain.
