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A stock is trading at $54. You believe there is a 50% chance the price of the stock will increase by 15% over the next
A stock is trading at $54. You believe there is a 50% chance the price of the stock will increase by 15% over the next 3 months. You believe there is a 15% chance the stock will drop by 5%, and you think there is only a 35% chance of a major drop in price of 60%. At-the-money 3-month puts are available at a cost of $690 per contract. What is the expected dollar profit for a writer of a naked put at the end of 3 months?
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