You buy a put option on IBM common stock. The option has an exercise price of $136 and IBMs stock currently trades at $140. The option premium is $5 per contract. a. What is your net profit on the option if IBMs stock price increases to $150 at expiration of the option and you exercise the option?

b. How much of the option premium is due to intrinsic value versus time value? c. What is your net profit if IBMs stock price decreases to $130? d. Draw the payout diagram at maturity on a short put option position, option premium = $2, and the same exercise price.