Question
Week 13 Homework 1.You own a put option on a Brambles share with an exercise price of $10. The option will expire in exactly six
Week 13 Homework
1.You own a put option on a Brambles share with an exercise price of $10. The option will expire in exactly six months' time.
a.If the share is trading at $8 in six months, what will be the payoff of the put?
b.If the share is trading at $23 in six months, what will be the payoff of the put?
c.Draw a payoff diagram showing the value of the put at expiration as a function of the share price at expiration.
2.Assume that you have shorted the put option in Problem 1.
a.If the share is trading at $8 in six months, what will you owe?
b.If the share is trading at $23 in six months, what will you owe?
c.Draw a payoff diagram showing the amount you owe at expiration as a function of the share price at expiration.
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