Q1

Suppose that you write a put contract with a strike price of GH40 and an expiration date in three months. The current stock price is GH41 and the contract is on 100 shares. What have you committed yourself to? How much could you gain or lose?

Q2

Suppose that a June put option to sell a share for GH60 cost GH4 and is held until March. Under what circumstances will the seller of the option make a prot? Under what circumstances will the option be exercised? Draw a diagram illustrating how the prot from a short position in the option depends on the stock price at maturity of the option.