You hold 1,000 shares of company XYZ on September 15. The current price of each share is

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You hold 1,000 shares of company XYZ on September 15. The current price of each share is $27. You forecast that in the next month the price of the stock will decrease. To hedge against a decrease in the value of the stock, you decide to take a long position in 10 put options on the stock. These options expire on October 15, and each option gives you the right to sell 100 shares.

The (per-share) strike price of the options is f.25 and their (per-share) premium is $2. On October 15, the price of stock XYZ is $21.

On the whole, do you gain or lose over the period between September 15 and October 15?

Related Book For answer-question

Advanced Financial Accounting

ISBN: 978-0078025624

10th edition

Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker

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Posted Date: Mar 20, 2023 05:52 AM

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You hold 1,000 shares of company XYZ on September 15. The current price of each share is

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The strike price of the put options is 25 which means that you have the right to sell 1000 shares of ... View the full answer

Advanced Financial Accounting

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