Question: On December21,2020,you purchased 100shares of ABC company at$11per share.You plan to sell your shares on December21,2021and are concerned aboutdownside risk.A put option on ABC stock

On December21,2020,you purchased 100shares of ABC company at$11per share.You plan to sell your shares on December21,2021and are concerned aboutdownside risk.A put option on ABC stock with an exercise price (K) of$40is currently priced(P)at$2per share.Also,two call options on ABC stock with exercise prices (K) of$40and$65are priced(C)at$2.5and$1.50per share,respectively.All options expire on December21,2021.What will be net profit/loss per shareon a long put if the stock price is $5 per share?

A.$33

B.$28

C.$18

D.$8

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Q:

On December21,2020,you purchased 100shares of ABC company at$11per share.You plan to sell your shares on December21,2021and are concerned aboutdownside risk.A put option on ABC stock with an exercise...

Q:

On December21,2020,you purchased 100shares of ABC company at$11per share.You plan to sell your shares on December21,2021and are concerned aboutdownside risk.A put option on ABC stock with an exercise...

Q:

On December21,2020,you purchased 100shares of ABC company at$11per share.You plan to sell your shares on December21,2021and are concerned aboutdownside risk.A put option on ABC stock with an exercise...

Q:

Part D. A trader sells a put option with a strike price of $55 for $9. The trader's maximum gain and maximum loss on that position is: Maximum gain is $9; maximum loss is $55 Maximum gain is $55;...

Q:

QUESTIONS On December 21, 2020. you purchased 100 shares of ABC company at $11 per share you plan to sell your shares on December 21, 2021 and are concerned about downside risk A put option on ABC...

Q:

QUESTIONS On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concemed about downside risk. A put option on ABC...

Q:

4.Assume the following information: U.S.deposit rate for 1 year = 11% U.S.borrowing rate for 1 year = 12% Swiss deposit rate for 1 year = 8% Swiss borrowing rate for 1 year = 10% Swiss forward rate...

Q:

QUESTION 28 On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on...

Q:

QUESTION 7 On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC...

Q:

On December 21, 2020, you purchased 100 shares of ABC company at $11 per share. You plan to sell your shares on December 21, 2021 and are concerned about downside risk. A put option on ABC stock with...

Q:

Briefly describe the major characteristics of the following group disability-income plans: a. Short-term disability-income plans b. Long-term disability-income plans

Q:

Ross White's machine shop uses 2,500 brackets during the course of a year, and this usage is relatively constant throughout the year. These brackets are purchased from a supplier 100 miles away for...

Q:

Activity that removes redundancy in a table design Group of answer choices System Information system Prototype Data model Process model Environment interaction model Entity Relationship Model CASE...

Q:

The force constant of a massless spring is 2 5 . 0 N / m . A mass of 0 . 4 5 kg is oscillating in simple harmonic motion at the end of the spring

Q:

Variable overheads vary with time. State whether the following statements are true or false:

Q:

3 Explain the various kinds of bias that can occur in cross-cultural interviews. How can the risk of bias by both interviewers and interviewees be reduced?

Q:

2 Is the second interviewer right in giving most of the time to discussing Ibrahims current projects? What are the advantages and disadvantages of adopting this approach?