At Crossfit one morning you overheard a conversation that Starlight Value Corporationo is going to issue a very negative announcement. Despite all that you learned in 6022 you decide to insider-trade and buy options on SVC's stock

Currently, SVC stock is at $22.00 per share and the T-bill rate is 4%. Three-month put options with a strike price of $20 are trading at 51 centes. If you buy the puts, and within a few hours SVC issues the announcement and the stock fails to $15 per share, at what price will the puts be trading post-announcement?

Answer rating: 100% (QA)

To determine the price at which the puts will be trading postannouncement we need to calculate the i... View the full answer