Suppose that a European put option to sell a share for $20 costs $3 and is held until maturity.
A) Under what circumstances will the seller of the option (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.
Draw a diagram illustrating how the profit for the holder of the option, from a long position in the option, depends on the stock price at maturity of the option