Graph the pay-off and profit from writting a European put option with option price (premium)=$10, strike...

Graph the pay-off and profit from writting a European put option with option price (premium)=$10, strike price=$50. Also calculate the intrinsic value of this option if the stock price is $45

Solutions

Expert Solution

Payoff of a short put = -max(X - St, 0)

Profit = Payoff + Put premium

X = $50

St = 45

Intrinsic value of the put option when St < X = X - St = 10 - 5 = $5

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jeff jeffy answered 1 year ago

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