Question
If a stock is currently $10 and I believe it's going to go up to $20 in 1 month. I will buy 100 put options
If a stock is currently $10 and I believe it's going to go up to $20 in 1 month. I will buy 100 put options with premium $1 at strike price $11. I need to pay $100 for the options, and when the stock goes to $11 I have the right to buy a 20$ stock at $11.
Does that mean I have to spent an addition $11*100 = $11,000 so I can buy the stock in order to sell it at $20000? Or does me paying $100 give me 100 shares of $11 stock?
Step by Step Solution
3.46 Rating (156 Votes )
There are 3 Steps involved in it
Step: 1
Call Option It means the option holder has a right to buy at the strike price The option holder i...
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
Fundamentals of Investments Valuation and Management
Authors: Bradford D. Jordan, Thomas W. Miller
5th edition
978-007728329, 9780073382357, 0077283295, 73382353, 978-0077283292
