Question

Suppose that a June put option to sell a share for $$\$ 60$$ costs $$\$ 4$$ and is held until June. Under what circumstances will the seller of the option (i.e., the party with the short position) make a profit? Under what circumstances will the option be exercised? Draw a diagram illustrating how the profit from a short position in the option depends on the stock price at maturity of the option.

   Suppose that a June put option to sell a share for $$\$ 60$$ costs $$\$ 4$$ and is held until June. Under what circumstances will the seller of the option (i.e., the party with the short position) make a profit? Under what circumstances will the option be exercised? Draw a diagram illustrating how the profit from a short position in the option depends on the stock price at maturity of the option.
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Options, Futures, and Other Derivatives
Options, Futures, and Other Derivatives
John C. Hull 10th Edition
Chapter 1, Problem 14 ↓

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The breakeven point is the stock price at which the seller's profit is zero. The seller of the option receives a premium of $4 for selling the put option. If the stock price at maturity is below the strike price of $60, the option will be exercised and the seller  Show more…

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Suppose that a June put option to sell a share for $$\$ 60$$ costs $$\$ 4$$ and is held until June. Under what circumstances will the seller of the option (i.e., the party with the short position) make a profit? Under what circumstances will the option be exercised? Draw a diagram illustrating how the profit from a short position in the option depends on the stock price at maturity of the option.
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