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You have purchased a put option on Pfizer common stock. The option has an exercise price of $40 and Pfizers stock currently trades at $42.

You have purchased a put option on Pfizer common stock. The option has an exercise price of $40 and Pfizers stock currently trades at $42. The option premium is $0.70 per contract.

A. What is your net profit on the option if Pfizers stock price does not change over the life of the option?

B. What is your net profit on the option if Pfizer's stock price falls to $34 and you exercise the option?

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