Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A company stock is currently selling for $180 per share. you take a short position in a put option contract on the company stock with

A company stock is currently selling for $180 per share. you take a short position in a put option contract on the company stock with a strike price of $170. the cost (premium) of the put option is $2 per share. which of the following statements is true?
a) the stock price could fall and you can still earn a positive profit
b) you are betting that the stock price falls below $180
c) your breakeven stock price is $172
d) if the option is exercised at maturity, you will earn a negative profit
e) both a and c are true

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

8th Edition

0077606779, 978-0697789945

More Books

Students also viewed these Finance questions

Question

What is the law of diminishing control?

Answered: 1 week ago

Question

Are husbands older than their wives?

Answered: 1 week ago

Question

Define self-esteem and discuss its impact on your life.

Answered: 1 week ago