Suppose you are considering buying a put option on Coca Cola (KO) stock. The stock price on November 3, 2020 was $49.37 and the put option premium quoted on a 05/21/2021 50 P was $4.45. Suppose you purchased one put option contract on November 3, 2020. (a) Suppose that 6 months later the stock price is $52. The option contract has decreased along with the stock price and is now worth $3.95. What will you do? (b) Suppose that on expiration day the stock is trading at $53. What is your profit (or loss)? (c) Suppose that on expiration day the stock price sinks to $49. What is your profit (or loss)?

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Market Efficiency

Market efficiency refers to the market's ability to provide investors with all available information about investment options for buying and selling securities. Market efficiency reflects the true value of securities without undervaluing or overvaluing them. When the quality and quantity of information increase, the market becomes more efficient, allowing it to reduce arbitrage and obtain higher market returns from investment. In a well-functioning market, everyone receives all information completely and immediately at no cost. It opens up a plethora of opportunities for investors to access various investment options.