Question
Suppose Megan purchases 100 shares of Goodyear Tire stock for $32.84 and at the same time she also buys a single put option that has
Suppose Megan purchases 100 shares of Goodyear Tire stock for $32.84 and at the same time she also buys a single put option that has a strike price of $30. The put option is currently selling for $1.55. (a) What is the option strategy that Megan has decided to employ? What would be the reason Megan would want to employ this strategy? [2 Points] (b) What is Megans total profit (or loss) from the option strategy if the price of the stock is $26, $30 or $40 in 12 months? [8 Points] (c) At what price of the stock will Megan break even? [4 Points] (d) What is the maximum potential loss and maximum potential profit from this option strategy? [4 Points
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