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2. Suppose that a put option was wrote (sold) for $42 costs $5 and is held until maturity. Under what circumstances will the seller of
2. Suppose that a put option was wrote (sold) for $42 costs $5 and is held until maturity. Under what circumstances will the seller of the option (the party with the short position) make a profit? Under what circumstances will the option be exercised? Draw a diagram illustrating how the profit from this option depends on the stock price.
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