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 $24. It six months later, the stock price per share is $24 or more, the option has no value. If in six months the stock price is lower than $24 per share, then you can purchase the stock and immediately sell it at the higher exercise price of $24. It 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 $24. Your profit would be the difference, $24 $22.50 : $1.50 per share, less the cost ofthe option. If you paid $1.00 per put option, then your prot would be $1.50 $1.00 : $0.50 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 260 shares of the stock at $29 per share and 70 six-month European put options with an exercise price of $24 Each put option costs $1. (51) 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 $15 and $35 per share in increments of $1.00. A B C D European Put Option Share Price Value with Options Value without Options $15.00 W J: V g 516 00 4160 d W x 517 00 4420 X- 4840 it $18.00 4680 g 5030 it $19.00 4940 g 5220 8\" S20 00 5200 g 5410 3 521.00 5460 3' 5600 3 322.00 5720 31 5790 3' 523 00 5980 g 5980 / 524 00 6240 f 6170 g 525 00 6500 '/ 6430 x 526 00 6760 _/ 6690 g 527 00 7020 f 6950 x 328.00 7280 / 7210 it $29.00 7540 '/ 7470 it 330 00 7800 f 7730 x 531 00 8060 f 7990 3 332.00 8320 / 8250 it $33.00 8580 f 8510 x 534 00 8840 f 8770 g 535 00 9100 f 9030 K (b) Discuss the value of the portfolio with and without the European put options. The lower the stock price, the |more v beneficial the put options. The options are worth nothing at a stock price of $ 24 or higher v . There is a benefit from the put options to the value of the portfolio for stock prices $ 24 x or lower v