Part -1:
You own a call option on Intuit stock with a strike price of $40. The option will expire in exactly 3 months' time.
a. If the stock is trading at $55 in 3 months, what will be the payoff of the call?
b. If the stock is trading at $35 in 3 months, what will be the payoff of the call?
c. Draw a payoff diagram showing the value of the call at expiration as a function of the stock price at expiration.
Part -2:
You own a put option on Ford stock with a strike price of $10. The option will expire in exactly 6 months' time.
a. If the stock is trading at $8 in 6 months, what will be the payoff of the put?
b. If the stock is trading at $23 in 6 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.