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(a) (2 points) After the Facebook parent company Meta’s growth prospects suddenly took a turn for the worse at the beginning of the month, you are considering to buy Meta (Facebook) put options with an expiration date in one year

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(a) (2 points) After the Facebook parent company Meta’s growth prospects suddenly took a turn for the worse at the beginning of the month, you are considering to buy Meta (Facebook) put options with an expiration date in one year. You identify two options from the February 2023 option series which have sufficient liquidity for you to feel comfortable trading. The two options have different strike prices but expire on the same day. Which of the two options is more expensive and why?

(b) (2 points) Draw a qualitative terminal profit diagram for both options.

(c) (2 points) What can you say about the market expectation of an investor who decides to purchase the cheaper of the two options compared to one who decides to purchase the more expensive option.