Question: Assume that you have shorted the put option in Problem 4. a. If the stock is trading at $8 in three months, what will you

Assume that you have shorted the put option in Problem 4.

a. If the stock is trading at $8 in three months, what will you owe?

b. If the stock is trading at $23 in three months, what will you owe?

c. Draw a payoff diagram showing the amount you owe at expiration as a function of the stock price at expiration.


Data from problem 4

You own a put option on Ford stock with a strike price of $10. The option will expire in exactly six months’ time.

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