(i) Assume that you have short

(i) Assume that you have shorted the call option in Problem 484 (iii).

a. If the stock is trading at $46 in three months, what will you owe?

 b. If the stock is trading at $32 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.

(ii) You own a put option on Ford stock with a strike price of $8. The option will expire in exactly six months’ time.

a. If the stock is trading at $2 in six months, what will be the payoff of the put?

b. If the stock is trading at $21 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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