Lumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at $25 per share. Lumo decides to take a long position in an at-the-money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months' time and costs $2.5 per share. Assume a contract consists of one put option. Required: a)Identify the strategy employed by Lumo above. b)Tabulate the Profit to the strategy at expiration for the following i)Exercise price $30; Stock price 20. ii)Exercise price $30; Stock price 3
Lumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at $25 per share. Lumo decides to take a long position in an at-the-money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months' time and costs $2.5 per share. Assume a contract consists of one put option. Required: a)Identify the strategy employed by Lumo above. b)Tabulate the Profit to the strategy at expiration for the following i)Exercise price $30; Stock price 20. ii)Exercise price $30; Stock price 3
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
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5)Lumo is a trader at ZNF Equity traders and has just identified a stock, UFSI Limited, which is currently trading at $25 per share. Lumo decides to take a long position in an at-the-money put option and simultaneously buys one share of UFSI stock. The put option expires in 3 months' time and costs $2.5 per share. Assume a contract consists of one put option.
Required:
a)Identify the strategy employed by Lumo above.
b)Tabulate the Profit to the strategy at expiration for the following
i)Exercise price $30; Stock price 20.
ii)Exercise price $30; Stock price 3
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