If you buy a put contract (the right to sell 100 stocks at the strike price of $145). What would be your net gain or loss from the entire trade if the stock price becomes $146?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Question

Mansukh

Assume the stock of Company XYZ is selling for $150 right now. There is a put option on the stock with a strike
price of $145 and a premium of $2. The option expires in two months.
If you buy a put contract (the right to sell 100 stocks at the strike price of $145). What would be your net gain or
loss from the entire trade if the stock price becomes $146?
100
Ⓒ400
-200
300
Transcribed Image Text:Assume the stock of Company XYZ is selling for $150 right now. There is a put option on the stock with a strike price of $145 and a premium of $2. The option expires in two months. If you buy a put contract (the right to sell 100 stocks at the strike price of $145). What would be your net gain or loss from the entire trade if the stock price becomes $146? 100 Ⓒ400 -200 300
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Knowledge Booster
Options
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education