On July 15, 2010, an investor owns 100 Google shares. As indicated in Table 1.3, the share
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On July 15, 2010, an investor owns 100 Google shares. As indicated in Table 1.3, the share price is about $497 and a December put option with a strike price of $460 costs $27.30. The investor is comparing two alternatives to limit downside risk. The first involves buying one December put option contract with a strike price of $460. The second involves instructing a broker to sell the 100 shares as soon as Google's price reaches $460. Discuss the advantages and disadvantages of the two strategies.
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