1. Your portfolio has one stock and one put. You bought the share of stock at $20, and the put at $2 with strike (exercise) price of $25.
List your portfolio’s gross payoffs and net profits when stock price is $10, $40.
2. If you have written three call options on Starbucks stock at $50 strike price. The premium of the call option is $1.50.
If stock price of Starbucks is $55 at the expiration date, what is your net payoff?
Do you wish the stock price to increase or decrease?