Assume that you own a put option on Zereta stock with a strike price of $26. When you bought the put, its cost to you was $4.0. The option will expire in exactly six months’ time. (Show your calculations)
a. If the stock is trading at $36 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 $16 in six months, what will be the payoff of the put? What will be the profit of the put?