What are the Option contracts? You are required to compute the profit/loss for each investors in below option contracts: (iii) Mr. Z writes a put option at an exercise price of ₹80 for a premium of ₹11 per share. The pri

Options Contract give its holder the right, but not the obligation, take or make delivery on or before a specified date at a stated price. Option Contracts are classified into two types on the basis of which party has the option: Call Option - A call option is with the buyer and gives the right to take delivery. The buyer of the call option has a right to buy the underlying asset from the option seller. Put Option - The put option is with the seller and the option gives the right to take delivery. The buyer of the put option has a right to sell the underlying asset to the option seller. (iii) For Mr. Z (Writer of Put Option): Exercise Price: ₹80 Premium Received: ₹11 Share Price at Expiry: ₹96 Since the share price (₹96) is above the exercise price (₹80), the buyer of the put option will not exercise it (as they can sell at a higher price in the market). Therefore, the option expires worthless for the buyer, and the writer (Mr. Z) keeps the premium. Profit/Loss = Premium Received Profit/Loss = ₹11.00 Mr. Z's Profit = ₹11.00 (Option will not be exercised)