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Suppose you think that there is a small possibility that XYZ stock might depreciate substantially in value in the next 3 months. Say the stock's
Suppose you think that there is a small possibility that XYZ stock might depreciate substantially in value in the next 3 months. Say the stock's current price is $200, and a put option expiring in 3 months has an exercise price of $180 and is selling at a premium of $5. With $10,000 to invest, you are considering investing $6,000 in the stock (30 shares) and $4,000 in puts (800 contracts). Compute the profit/loss of your portfolio 3 months from now if the price of XYZ stock is $160
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