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Draw a payoff diagram showing the value

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You own a put option on Ford stock with a strike price of ?$8. When you bought the? put, its cost to you was ?$4. The option will expire in exactly six? months' time.

a. If the stock is trading at ?$3 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 ?$20 in six? months, 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.

Reference no: EM132842767

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