What is the profit and loss from the put option

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Reference no: EM131980827

Suppose you purchase 100 shares of a common stock at $25 and you want to protect its downside price risk. You bought a put option for months with a strike price of $25. (a) After some time, price of common stock goes to $50 and you want to exercise the put, what is the profit/loss from the put option? Draw the pay-off diagram? (b) After some time, the price of common stock goes down to $10, what is the value of put option? Draw the pay-off diagram?

Reference no: EM131980827

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