FREE Trial

How can the value of a forward start put option on a non-dividend-paying stock be calculated if

Question:

How can the value of a forward start put option on a non-dividend-paying stock be calculated if it is agreed that the strike price will be 10% greater than the stock price at the time the option starts?

Strike Price
In finance, the strike price of an option is the fixed price at which the owner of the option can buy, or sell, the underlying security or commodity.
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Answer rating: 60% (10 reviews)

When the strike price of an option on a nondividendpaying stock is defined as 10 greater t...View the full answer


answer-question-section
Answered By
tutor-profile-image
ANDREW KIPRUTO
Academic Writing Expert I have over 7 years of research and application experience. I am trained and licensed to provide expertise in IT information, computer sciences related topics and other units like chemistry, Business, law, biology, biochemistry, and genetics. I'm a network and IT admin with +8 years of experience in all kind of environments. I can help you in the following areas: Networking - Ethernet, Wireless Airmax and 802.11, fiber networks on GPON/GEPON and WDM - Protocols and IP Services: VLANs, LACP, ACLs, VPNs, OSPF, BGP, RADIUS, PPPoE, DNS, Proxies, SNMP - Vendors: MikroTik, Ubiquiti, Cisco, Juniper, HP, Dell, DrayTek, SMC, Zyxel, Furukawa Electric, and many more - Monitoring Systems: PRTG, Zabbix, Whatsup Gold, TheDude, RRDtoo Always available for new projects! Contact me for any inquiries
4.30+ 1+ Reviews 10+ Question Solved
Related Book For  book-img-for-question
Options Futures and Other Derivatives

Options Futures and Other Derivatives

ISBN: 978-0134472089

10th edition

Authors: John C. Hull

See More Books
Question Posted:
See More Questions

Related Video

A put option is a financial contract that gives the owner the right, but not the obligation, to sell an underlying asset, such as a stock or a commodity, at a predetermined price, known as the strike price, on or before a specific date, known as the expiration date. Put options are used by investors as a form of insurance against a decline in the value of the underlying asset. If an investor expects the value of an asset to fall in the future, they can purchase a put option on that asset. If the value of the asset does fall, the put option will increase in value, allowing the investor to sell the asset at the higher strike price. For example, if an investor owns 100 shares of a stock that is currently trading at $50 per share, they may purchase a put option with a strike price of $45 and an expiration date three months in the future. If the stock price falls to $40 before the expiration date, the investor can exercise the put option and sell their shares for $45 each, even though the market price is only $40. This would allow the investor to limit their losses. It\'s important to note that purchasing a put option involves paying a premium to the seller of the option, and the investor can lose the entire premium if the price of the underlying asset does not decline as expected. Put options are just one type of financial derivative and should only be used by experienced investors who understand the risks involved.

Students also viewed these Corporate Finance questions

Brunner And Suddarth Textbook Of Medical Surgical Nursing Vol 1 12th Edition - ISBN: 1469838605 - Free Book