You bought an at-the-money put of Microsoft with a $280 strike price (at the money means...

 

Transcribed Image Text:

You bought an at-the-money put of Microsoft with a $280 strike price (at the money means stock price equal exercise price) and 6-months maturity. The put premium is $X. (X is your last digit of Bentley ID. If your last digit is 0, then use X=1.) Each put contract has the right to sell 100 shares of MSFT. 1. How much should you put as an initial investment? 2. What will be your dollar loss if Microsoft's stock price increases 20%? 3. What will be your dollar profit if Microsoft's stock price drops 20%? You bought an at-the-money put of Microsoft with a $280 strike price (at the money means stock price equal exercise price) and 6-months maturity. The put premium is $X. (X is your last digit of Bentley ID. If your last digit is 0, then use X=1.) Each put contract has the right to sell 100 shares of MSFT. 1. How much should you put as an initial investment? 2. What will be your dollar loss if Microsoft's stock price increases 20%? 3. What will be your dollar profit if Microsoft's stock price drops 20%?

Answer rating: 100% (QA)

Given Strike price X 280 Premium of put option X 1 since X is the last digit of Bentley ID Number of ... View the full answer