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A put option in finance allows you to sell a share of stock at a given price in the future. There are different types of
A put option in finance allows you to sell a share of stock at a given price in the future. There are different types of put options. A European put option allows you to sell a share of stock at a given price, called the exercise price, at a particular point in time after the purchase of the option. month European put option for a share of stock with an exercise price of $26. If six months later, the stock price per share is $26 or more, the option has no share in six months is $22.50, you can purchase a share of the stock for $22.50 and then use the put option to immediately sell the share for $26. Your profit be the difference, $26$22.50=$3.50 per share, less the cost of the option. If you paid $1.00 per put option, then your profit would be $3.50 - $1.00=$2.50 per at $28 per share and 50 six-month European put options with an exercise price of $26. Each put option costs $1. (a) Using data tables, construct a model that shows the value of the portfolio with options and without options for a share price in six months $20 and per share in increments of $1.00. What is the benefit of the put options on the portfolio value for the different share prices? For subtractive or negative numbers use a minus sign even if there is a + sign before the blank (Example: 300 ). If you answer is zero, enter " 0 ". (b) Discuss the value of the portfolio with and without the European put options. The lower the stock price, the beneficial the put options. The options are worth nothing at a stock price of $ or W. There is a benefit from the put options to the overall portfolio for stock $ 0
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