Question
An investor owns 5,000 shares of stock A, which is currently trading at $100 per share. The investor is fearful of a sharp decrease of
An investor owns 5,000 shares of stock A, which is currently trading at $100 per share. The investor is fearful of a sharp decrease of the stock price. He decides to buy 50 December 92 put option at a price of $4, paying $20,000. Note: Each put option contract provides for the right to sell 100 shares of stock. December 92 put option means that the strike price of the put is 92 and it matures in December. If the stock price is $__, then the profit associated with the passive strategy is the same as the profit associated with the protective put strategy.
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