Question
XYZ's share price is currently $60. You are considering two possible investment strategies to profit from a predicted fall in XYZ share price: (i) short
XYZ's share price is currently $60. You are considering two possible investment strategies to profit from a predicted fall in XYZ share price: (i) short sell 50 shares at the spot price, or (ii) enter a long put option (quoted at $3.40) which allows you to sell 100 shares at a strike price of $50.
Calculate the share price at which the two strategies generate the same net profit.
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Corporate Finance Principles and Practice
Authors: Denzil Watson, Antony Head
7th edition
1292103035, 978-1292103082, 1292103086, 978-1292103037
