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A popular investment strategy involves selling out of the money put options, particularly on the S&F . Suppose that you sold a December put option
A popular investment strategy involves selling out of the money put options, particularly on the S&F . Suppose that you sold a December put option on the S&P 500 with a strike price of . The bid and ask prices are provided in the table below. As a reference, the S & P index is currently around 2480. For the following questions, assume (as we did in class) that we can ignore discounting when comparing the exercise payoff and option premium. a. What's your profit (loss) if in December the S&P 500 Index is 2230(almostequalto 10% decline)? b. What is your profit (loss) if in December the S&P 500 Index is 2200(almostequalto 11% decline)? c. What is your profit (loss) if in December the S&P 500 Index is 2180(almostequalto 12% decline)? d. What is your profit (loss) if in December the S&P 500 Index is 2150 (almostequalto 13% decline)? e. Plot your results on the following graph
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