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Intro Suppose the stock of GameStop trades currently for $350. You believe that the stock is overvalued, and expect that it would decline in the
Intro Suppose the stock of GameStop trades currently for $350. You believe that the stock is overvalued, and expect that it would decline in the next month. You belive you can express your view by entering a position on GameStop put contracts with expiration in 1 month. Suppose the bid and the ask on these put contracts are respectively $20 and $25 a share. Suppose you have 10,000 to invest in the put position Part 1 Attempt 1/5 for 10 pts. In order to express your view on the future direction of the GameStop stock price, you plan to enter a short position in GameStop 1-month put contracts enter a long position in GameStop 1-month put contracts Correct You are interested in a put strategy that pays off when the price of GameStop declines. The buyer of a put option makes money when the stock price declies. Thus, you should enter a long position in GameStop put contracts. - Attempt 5/10 for 10 pts. Part 2 How many put contracts can you afford to enter into? b+ decimals Submit
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