d)Consider a put option selling for Ksh.14 in which the exercise price is Ksh.162 and the price
Question:
d)Consider a put option selling for Ksh.14 in which the exercise price is Ksh.162 and the price of the underlying is Ksh.164.
i)Determine the value at expiration and the profit for a buyer under the following outcomes:
1)The price of the underlying at expiration is Ksh.164.(2 marks)
2)The price of the underlying at expiration is Ksh.158. (2 marks)
ii)Determine the value at expiration and the profit for a seller under the following outcomes:
1)The price of the underlying at expiration is Ksh.153. (2 marks)
2)The price of the underlying at expiration is Ksh.172.(2 marks)
iii)Determine the following:
1)The maximum profit to the buyer (maximum loss to the seller). (1 marks)
2)The maximum loss to the buyer (maximum profit to the seller). (1 marks)
Determine the breakeven price of the underlying at expiration.