Alan just purchased 100 shares of Global, Inc. (GLO) worth $45 each and to protect his investment
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Question:
Alan just purchased 100 shares of Global, Inc. (GLO) worth $45 each and to protect his investment he purchased a three-month put option with a strike price of $45 for a cost of $400. One of two scenarios is expected to occur within three months:
(a) GLO stock declines in value to $33 and
(b) GLO stock is valued at $61.
Calculate the gain or loss under each scenario and explain how the hedge has provided protection for Alan's position in GLO shares. Ignore transaction costs.
Related Book For
Fundamentals Of Corporate Finance
ISBN: 9780135811603
5th Edition
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
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