You write a January IBM put option with exercise price 125. a. Graph the payoff of this

Question:

You write a January IBM put option with exercise price 125.

a. Graph the payoff of this portfolio at option expiration as a function of IBM’s stock price at that time.

b. What will be the profit/loss on this position if IBM is selling at 128 on the option expiration date? What if IBM is selling at 135? Use The Wall Street Journal listing from Figure 20.1 to answer this question.

c. At what two stock prices will you just break even on your investment?

d. What kind of “bet” is this investor making; that is, what must this investor believe about IBM’s stock price to justify this position?

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Investments

ISBN: 9780073530703

9th Edition

Authors: Zvi Bodie, Alex Kane, Alan Marcus

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Question Posted: Jul 31, 2024 05:01 AM

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You write a January IBM put option with exercise price 125. a. Graph the payoff of this

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