You have written a put option on Diebold Inc. common stock. The option has an exercise price of $28 and Diebold’s stock currently trades at $30.50. The option premium is

$0.75 per contract. (LG 10-4)

a. What is your net profit if Diebold’s stock price increases to $32 and stays there until the option expires?

b. What is your net profit on the option if Diebold’s stock price decreases to $25 at expiration of the option and the option holder exercises the option?

AppendixLO1