You are analyzing a firm. Your conclusion is that the company is solid, but the stock is considerably overpriced and you are expecting an imminent (within 1 month) correction of about 5% to 10%. The current price of the stock is $247.50. Following my advice, you want to short 1 lot of 100 puts.

(a) Considering puts are sold with strikes every $5, starting at 200, 205, 210, 215, all the way up to 295, 300. Which strike would you pick? Explain.

(b) Considering that options are available with a maturity of 1 week, 5 weeks, 9 weeks, 6 months, and 1 year. Which maturity would you pick? Explain.

(c) Assume the options are not exercise prior to maturity. Consider the three scenarios at maturity: (i) the stock price at maturity is down by 15%, (ii) the stock price at maturity down by 1%, and (iii) the stock price at maturity is down 90%. Explains what happens with your options in each scenario (Are they executed, what are the cash flows, what is the result on your portfolio, etc.).