Question
in a protective put option scenario, when the put option is agreed at the exercises price (X) of 45, and share price is at 50,
in a protective put option scenario, when the put option is agreed at the exercises price (X) of 45, and share price is at 50, but now share price goes down to 40, hence I will exercise my put option making 5 profit per option (45-40=5). However as this is a protective put option, I will buy the underlying stock but surely that will lose me money as I have taken a long position on it, therefore doesn't the loss made on the underlying stock just cancel out my profit made from the put option? how does the protective put option, put option parity work?
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