In a "protective put" we know that to choose a lower exercise price E for the put will make the put's premium lower.

a.

Explain why the put premium will be lower if E is selected to be lower.

b.

Would it ever be possible for the "kink" in the protective put payoff line be at a point above zero?

Prove your answer.

Answer rating: 100% (QA)

a A lower exercise price E for the put will make the puts premium lo... View the full answer