Question
You have shorted a put option on Ford stock with a strike price of $9. When you sold (wrote) the put, you received $4. The
You have shorted a put option on Ford stock with a strike price of $9. When you sold (wrote) the put, you received $4. The option will expire in exactly six months' time.
a. If the stock is trading at $5 in six months, what will your payoff be? What will your profit be?
b. If the stock is trading at $19 in six months, what will your payoff be? What will your profit be?
c. Draw a payoff diagram showing the value of the put at expiration as a function of the stock price at expiration.
d. Redo c, but instead of showing payoffs, show profits.
Round to the nearest dollar. Full explanations and the right answer will be liked and commented upon. Thank you!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started