Question
You own a put option on Ford stock with a strike price of $9. When you bought the put, its cost to you was
You own a put option on Ford stock with a strike price of $9. When you bought the put, its cost to you was $2. The option will expire in exactly six montha' time. a. If the stock is trading at $7 in six months, what will be the payoff of the put? What will be the profit of the put? b. if the stock is trading at $19 in six manths, what will be the payoff of the put? What will be the profit of the put? 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.
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Fundamentals of Corporate Finance
Authors: Berk, DeMarzo, Harford
2nd edition
132148234, 978-0132148238
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