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Function of the stock price at expiration

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Reference no: EM132731440

You have shorted a put option on Ford stock with a strike price of ?$11. When you sold? (wrote) the? put, you received ?$2. The option will expire in exactly six? months' time.

a. If the stock is trading at ?$9 in six? months, what will your payoff? be? What will your profit? be?

b. If the stock is trading at ?$26 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.

Reference no: EM132731440

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