Answered step by step
Verified Expert Solution
Question
1 Approved Answer
An investor owns 5.000 shares of stock AB, 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 AB, 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 95 put option at a price of $3. paying $15,000. Note: Each put option contract provides for the right to sell 100 shares of stock. December 95 put option means that the strike price of the put is 95 and it matures in December If IBM stock price decreases from $100 to $80, the profit associated with the passive strategy is and the profit associated with the protective put strategy is A. -$100,000, -$55,000 B. -$100,000, -$40,000 C. -$100,000, -$35,000 D.-$100,000,-$45,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started