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An investor sells an at-the-money European put option on one share of a stock which is currently trading at $100. The price of the put
An investor sells an at-the-money European put option on one share of a stock which is currently trading at $100. The price of the put option is currently $10 and it expires in one month. Draw the profit and loss diagram for this trade. When should the option be exercised? What is the maximum that the investor can make on this position? What is the maximum he or she can lose? Assume that there is no interest rate.
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