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A call option on an S&P 500futures contract has an exercise price of 1490; the call premium iscurrently $6.50. On the same date, a put option on the S&P 500futures contract has an exercise price of 1490; the put premium iscurrently $7.50. The two options have the same expirationdate.

Assume that the S&P 500 index is 1485 atexpiration:

A) Should the call option beexercised or should it be left to expire? What is the net ($) gainor loss after accounting for the premium paid to purchase theoption?

B) Should the put option be exercised or should it be left toexpire? What is the net ($) gain or loss after accounting for thepremium paid to purchase the option?