Consider a put option on a share with a strike price of $60. If the share price at expiration is $50, the pay-off from the put option is $10.

Question

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The put option gives the holder the right to sell the share at the strike price of $60. Since the share price at expiration is $50, the put option can be exercised to sell the share at $60 and make a profit of $10. Therefore, the pay-off from the put option is $10.

Consider a Put Option on a Share with a Strike