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Draw a profit profile (diagram showing the profit level for all possible prices of the underlying security of an option) for the case of written
Draw a profit profile (diagram showing the profit level for all possible prices of the underlying security of an option) for the case of written (sold) put.
a.Explain the shape of your diagram.
b.Now suppose the price of the underlying security rises.What will the profit profile look like now to someone who now writes this put?Draw the new profit profile and explain how it is different from the previous one.
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