Suppose a April put option to sell share of company for Rs 500 cost Rs 40 and is held until April. Under what circumstance the seller of the option (i.e party in the short position) make a profit. Under what circumstances the option will be exercised ?.Draw a diagram illustrating how the profit from the short position is dependent on the share price at the maturity of option.
Suppose a April put option to sell share of company for Rs 500 cost Rs 40 and is held until April. Under what circumstance the seller of the option (i.e party in the short position) make a profit. Under what circumstances the option will be exercised ?.Draw a diagram illustrating how the profit from the short position is dependent on the share price at the maturity of option.
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
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Transcribed Image Text:Suppose a April put option to sell share of company
for Rs 500 cost Rs 40 and is held until April. Under
what circumstance the seller of the option (i.e party in
the short position) make a profit. Under what
circumstances the option will be exercised ?.Draw a
diagram illustrating how the profit from the short
position is dependent on the share price at the
maturity of option.
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