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Calculate the pay off

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Q1. Graph the pay-off and Profit from writing a European put option with option price (premium) = $10, strike price = $50. Also calculate the intrinsic value of this option if the stock price in $45. [4]

Q2. Suppose you buy a 100 strike European put and sells a 120 strike European put on the same stock. Calculate the pay off.

Q3. Suppose a spot price of a market index is $900. After 6 months the market index is priced at 920. The annual risk free rate is 5%. The premium on the long put, with exercise price of 930 is $10. Calculate the profit at expiration for a long put.

Reference no: EM132561684

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