Question
Suppose you simultaneously purchase an underlying priced at $77 and a put option on it, with an exercise price of $75 and selling at $3
Suppose you simultaneously purchase an underlying priced at $77 and a put option on it, with an exercise price of $75 and selling at $3
- What is the term commonly used for the positions that you have taken?
- Show the payoff and profit formula for this option strategy
Consider the following options portfolio. You write a January expiration call option in IMB with an exercise price of $195. You write a January IBM put option with an exercise price of $190.
- What will be the profit/loss on this position if IBM is selling at $198 on the option expiration date? What if IBM is selling at $205?
- At what two stock prices will you just break even on your investment?
Step by Step Solution
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Q1 a Protective put is the common name of the strategy where you buy both stock and put option Buy a ...
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Principles of Corporate Finance
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
10th Edition
9780073530734, 77404890, 73530735, 978-0077404895
