Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance

Authors: Richard Stanton

2nd Edition

1519662106, 978-1519662101

More Books

Students also viewed these Finance questions

Question

Explain the factors influencing wage and salary administration.

Answered: 1 week ago

Question

Examine various types of executive compensation plans.

Answered: 1 week ago

Question

1. What is the meaning and definition of banks ?

Answered: 1 week ago

Question

4. Does cultural aptitude impact ones emotional intelligence?

Answered: 1 week ago