Question

Exercisel You have a put option on Toyota shares at an exercise price of $10. The option will expire (You own a put option on Toyota stock with a strike price of $10. The option will expire in exactly six months' time). Question 1: If the stock is trading at $8 on the market in six months, what will be the gain from the sale? (If the stock is trading at $8 in six months, what will be the payoff of the put?) Question 2: If the stock is trading at $23 in six months, what will be the payoff of the put? Question 3: Draw a gain chart showing the value of the put at expiration as a function of the share price at expiration. (Draw a payoff diagram showing the value of the put at expiration as a function of the stock price at expiration).

          Exercisel
You have a put option on Toyota shares at an exercise price of
$10. The option will expire
(You own a put option on Toyota stock with a strike price of
$10. The option
will expire in exactly six months' time).
Question 1:
If the stock is trading at $8 on the market in six months, what
will be the gain from the sale?
(If the stock is trading at $8 in six months, what will be the
payoff of the put?)
Question 2:
If the stock is trading at $23 in six months, what will be the
payoff of the put?
Question 3:
Draw a gain chart showing the value of the put at expiration
as a function of the
share price at expiration. (Draw a payoff diagram showing the
value of the put at expiration as a
function of the stock price at expiration).

Exercisel
You have a put option on Toyota shares at an exercise price of
10. The option will expire
(You own a put option on Toyota stock with a strike price of10. The option
will expire in exactly six months' time).
Question 1:
If the stock is trading at 8 on the market in six months, what
will be the gain from the sale?
(If the stock is trading at8 in six months, what will be the
payoff of the put?)
Question 2:
If the stock is trading at 23 in six months, what will be the
payoff of the put?
Question 3:
Draw a gain chart showing the value of the put at expiration
as a function of the
share price at expiration. (Draw a payoff diagram showing the
value of the put at expiration as a
function of the stock price at expiration).

Added by Luis F.

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