Delta stock (DAL) is trading at 11.70 dollars today.
Consider an American put option on $1$ share of DAL with $K$ = 12 and expiration in $T$ = .25 years.
The put is selling today for $1.46.
Assume the risk-free rate is 1%.
You hold the option until expiration. At that time DAL is trading at $10.
What is the payoff of the put option? What is your profit?
I am confused about the profit and how future value money plays into this. The payoff would be: $$(K-s_T)$$
Which in this case is just $2.
How about the profit? Would it be just $$2-(premium paid)?$$
How does the $FV$ plays into this?