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.

Problem 4.

You own a call option on Intuit stock with a strike price of \($40.\) The option will expire in exactly three months.

a. If the stock is trading at \($55\) in three months, what will be the payoff of the call?

b. If the stock is trading at \($35\) in three months, what will be the payoff of the call?

c. Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration.