Question #1: Explain why strengthening basis benefits a short hedge and hurts a long hedge. Question #2: Suppose you observe a European call option that is priced at less than the value of max (0?S0-X(1+r)^(-T)). What strategy will you suggest? Question#3 What are implied volatilities? Can implied volatilities be expected to vary for options on the same stock with the same expiration but different strike prices?