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

You own a put option on Ford stock with a strike price of $10. 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?

b. If the stock is trading at $23 in six months, what will be the payoff of the put?

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


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