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:

Polygraph

A device or procedure that measures and records several physiological indicators such as blood pressure, pulse, respiration, and skin conductivity while the subject is asked and answers a series of questions, purportedly to detect lies.

Perspiration

The process by which sweat glands in the skin secrete sweat, a fluid consisting primarily of water along with various dissolved solids, which evaporates to help cool the body.

Food Deprivation

The condition of being withheld from food, leading to hunger or potential starvation.

Instinct

A fixed behavioral response in animals that is instinctual and occurs upon encountering certain stimuli.