Question
consider the following information on put and call option for citigroup strike price : 32.5 put price : 2.85 call price 1.65 1) calculate the
consider the following information on put and call option for citigroup
strike price : 32.5 put price : 2.85 call price 1.65
1) calculate the net value of a protective put position at a stock price at expiration of 20 ?
we solved this question with the professor, the answer was as following:
value of protective put= ( (32.5-20) -2.85 ) + 20
thus the value of protective put = 29.65
my doubt is, why do we add 20 ?
this was our Doctor answer, but from what i know, protective put option strategy is : investor having long position in stock and long position in Put option.
thus, i think the value of protective put strategy should be: (profit on put ) =(32.5-20) -2.85 )
plus the profit on long position on stock ( we need the initial price of the stock to get that, and it is not given in the problem) so my doubt is, why did he solved the question this way ? why did he add the stock price at matuirty 20 to the profit on put position) ?
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