Several Rumors Concerning Nu-Tek Stock Are Causing the Market Price

question 77

Multiple Choice

Several rumors concerning Nu-Tek stock are causing the market price of the stock to be quite volatile. Given this situation, you decide to buy both a one-month European $10 put and a one-
Month European $10 call on this stock. The call premium is $.35 and the put premium is $1.60. What
Will your net profit or loss be on these option positions if the stock price is $7 on the day the options
Expire? Ignore trading costs and taxes.

• A) -$495
• B) -$35
• C) $105
• D) $140
• E) $175

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Definitions:

Federal Court

Federal court refers to a system of courts that have jurisdiction over legal disputes governed by federal law, including disputes between states, constitutional issues, and matters involving the federal government.

Jurisdiction

Jurisdiction pertains to the official power to make legal decisions and judgments, often within a specific geographic area or over certain types of legal cases.

Consumer Surplus

Consumer surplus is the difference between the highest price a consumer is willing to pay for a good or service and the actual price they pay.

Capture

The act of gaining control or possession of something, often referring to market share or resources.