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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. For example, suppose you purchase a sixmonth European put option for a share of stock with an exercise price of $ If six months later, the stock price per share is $ or more, the option has no value. If in six months the stock price is lower than $ per share, then you can purchase the stock and immediately sell it at the higher exercise price of $ If the price per share in six months is $ you can purchase a share of the stock for $ and then use the put option to immediately sell the share for $ Your profit would be the difference, $ $ $ per share, less the cost of the option. If you paid $ per put option, then your profit would be $ $ $ per share. The point of purchasing a European option is to limit the risk of a decrease in the pershare price of the stock. Suppose you purchased shares of the stock at $ per share and sixmonth European put options with an exercise price of $ Each put option costs $
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 between $ and $ per share in increments of $ 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: If you answer is zero, enter
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