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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 six-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 value. If in six months the stock price is lower than \\( \\$ 26 \\) per share, then you can purchase the stock and immediately sell it at the higher exercise price of \\( \\$ 26 \\). If the price per 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 would 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 share. The point of purchasing a European option is to limit the risk of a decrease in the per-share price of the stock. Suppose you purchased 200 shares of the stock at \\( \\$ 28 \\) per share and 100 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 between \\( \\$ 20 \\) and \\( \\$ 29 \\) 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 \
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