Assume you have purchased 100,000 equity shares of a listed company in Australia and want to...

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Assume you have purchased 100,000 equity shares of a listed company in Australia and want to sell these shares after 6 months to buy a house in Sydney. A call option and a put option on these shares are currently selling at $3 and $3, respectively. The exercise prices of the call and put options are $120 and $100, respectively. You are considering using one of the following strategies to protect the value of your portfolio till you sell the shares in six months: i. Aa protective put ii. a covered call iii. A zero cost collar Calculate the income from your portfolio after 6 months for the following three market prices: $125, $110 and $90. Out of the above three strategies, which one is the best strategy? Justify your answer based on the calculations you have performed. Assume you have purchased 100,000 equity shares of a listed company in Australia and want to sell these shares after 6 months to buy a house in Sydney. A call option and a put option on these shares are currently selling at $3 and $3, respectively. The exercise prices of the call and put options are $120 and $100, respectively. You are considering using one of the following strategies to protect the value of your portfolio till you sell the shares in six months: i. Aa protective put ii. a covered call iii. A zero cost collar Calculate the income from your portfolio after 6 months for the following three market prices: $125, $110 and $90. Out of the above three strategies, which one is the best strategy? Justify your answer based on the calculations you have performed.

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To compare the three strategies we need to calculate the income from the portfolio after six months ... View the full answer