Final answer:
The trader makes a profit when the stock price falls below $50/share, the break-even point being the strike price minus the premium paid for the put option.
Step-by-step explanation:
A trader buys 1 put option contract on the stock with a strike price of $60/share when the option price is $10/share. The question asks when does the trader make a profit on this put option.
The trader will make a profit when the price of the underlying stock falls below $50/share. Since each options contract typically represents 100 shares, the trader's break-even point would be the strike price minus the option premium paid, which in this case is $60 - $10 = $50.
If the price of the stock is lower than $50 when the trader exercises the option, they can buy the stock at the market price and immediately sell it for the higher strike price, netting a profit equal to the difference minus the premium paid.