You have shorted a put option on Ford stock with a strike price of $15....
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You have shorted a put option on Ford stock with a strike price of $15. When you sold (wrote) the put, you received $5. The option will expire in exactly six months' time.a. If the stock is trading at $10 in six months, what will your payoff be? What will your profit be?
b. If the stock is trading at $28 in six months, what will your payoff be? What will your profit be?
c. Draw a payoff diagram showing the value of the put at expiration as a function of the stock price at expiration.
d. Redo c, but instead of showing payoffs, show profits.
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