Question: Dumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at R25 per share. Dumo

Dumo is a trader at ZNF Equity traders and has

Dumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at R25 per share. Dumo decides to take a long position in at- the money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months' time and costs R2.5 per share. Assume a contract consists of one put option. Required: 1. Identify the strategy employed by Dumo above. 2. Tabulate the Profit to the strategy at expiration for the following 3. Exercise price R30; Stock price 20. Exercise price R30; Stock price 35. 4. What is the value of stock when ST=20 and ST=35

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