Determine what will the profit be after three months

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Reference no: EM13329261

A particular put is the option to sell stock at $40. It expires after three months and currently sells for $2 when the price of the stock is $42.

a) If an investor buys the put, what will the profit be after three months if the price of the stock is $45? $40? $35?

b) What will the profit from selling this put be after three months if the price of the stock is $45? $40? $35?

c) Compare the answers to a) and b). What is the implication of the comparison?

Reference no: EM13329261

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