Question
4- An investors buys 100 shares of XYZ stock at $30/share and one XYZ 40 put @ premium 3 to hedge the position. The
4- An investors buys 100 shares of XYZ stock at $30/share and one XYZ 40 put @ premium 3 to hedge the position. The stock has appreciated to $40/share in the past eight months. The investor is confident that the stock is a good long-term investment with additional upside potential but is concerned about a near-term weakness in the overall market that could wipe out his unrealized gains. If XYZ stock drops to $27 and the investor exercises the put, what is the profit or loss on the hedged position?
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