You own a put option on Ford stock with a strike price of $14. When you bought the put, its cost to you was $6. The option will expire in exactly six months' time.
a. If the stock is trading at $8 in six months, what will be the payoff of the put? What will be the profit of the put? Round to nearest dollar
b. If the stock is trading at $26 in six months, what will be the payoff of the put? What will be the profit of the put? Round to nearest dollar
a). Payoff of the Put = Max[{Strike Price - Stock Price},0]
= Max[{$14 - $6},0]
= $8
Profit = Payoff of the Put - Premium Paid = $8 - $6 = $2
b). Payoff of the Put = Max[{Strike Price - Stock Price},0]
= Max[{$14 - $26},0]
= $0
Profit = Payoff of the Put - Premium Paid = $0 - $6 = -$6
You own a put option on Ford stock with a strike price of $14. When you...
You own a put option on Ford stock with a strike price of $14. The option will expire in exactly six months' time. When you bought the put, its cost to you was $2. The option will expire in exacly six months' time. a. If the stock is trading at $10 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 $25 in six...
You own a put option on Ford stock with a strike price of $11. The option will expire in exactly six months' time. When you bought the put, its oost to you was $2. The option will expire in exactly six months' time. a. If the stock is trading at $7 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...
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