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hi expert, can i please have the excel formulas of the three questions down there, thankyou Q1. Use put options to lock the selling price
hi expert, can i please have the excel formulas of the three questions down there, thankyou
Q1. Use put options to lock the selling price | Sam purchases 100 shares of a stock at $94 today. He wants to protect this investment against the market flunctation over the next three months. He decides to buy a three-month put options currently sold at $4.70 with a strike price of $95 (1 contract = 100 shares). Draw a chart to compare how the spot price 3 months later, in the range of $85-$105, will affect Sam's profit/loss in 1) stock investment, and 2) stock investment plus option hedging. | |||||||||||
Answer: | ||||||||||||
Let S be the spot price | ||||||||||||
Profit/loss of selling 100 shares in the market: | ||||||||||||
Profit/loss of buying 100 shares from the market and then exercising the put option to sell 100 shares: |
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