Jack buys an asset for $80. To hedge its risk, Jack buys a one year put option
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Question:
Jack buys an asset for $80. To hedge its risk, Jack buys a one year put option for $2 with the strike price of $80 on the same asset.
Draw both positions (long position in the asset and the long put option) on the same graph.
Graph: Label all points
What are the value of Jack's investment (both his asset and the put) for 0 ST $80, 80 ST ST > $82 at the expiration of this option? Assume 0% interest rate.
What type of contract is the combined (total) positions (draw the combined position on the same graph)?
Related Book For
Financial Reporting And Analysis
ISBN: 9781260247848
8th Edition
Authors: Lawrence Revsine, Daniel Collins, Bruce Johnson, Fred Mittelstaedt, Leonard Soffer
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