Question
1) Dumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at R25 per share.
1) Dumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at R25 per share. Dumo decides to take a long position in at-the money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months time and costs R2.5 per share. Assume a contract consists of one put option. Required: a) Identify the strategy employed by Dumo above. (2) b) Tabulate the Profit to the strategy at expiration for the following (8) i. Exercise price R30; Stock price 20. ii. Exercise price R30; Stock price 35.
finance
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