You own a put option on Ford stock with a strike price of ​$14.
When you bought the​ put, its cost to you was ​$2. The option will expire in exactly six​ months' time.
a. If the stock is trading at ​$10 in six​ months, what will be the payoff of the​ put? What will be the profit of the​ put?
b. If the stock is trading at ​$26 in six​ months, what will be the payoff of the​ put? What will be the profit 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.
d. Redo​ c, but instead of showing​ payoffs, show profits.