You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is $40. The stock has a high standard deviation. It matures in 6 months and is selling for a premium of $6. What is your profit or loss if the close out price turns out to be $35? Someone owned the stock already and paid $50. When they bought it, they wrote the option. What is there profit or loss at the time of the close out.
You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is $40. The stock has a high standard deviation. It matures in 6 months and is selling for a premium of $6. What is your profit or loss if the close out price turns out to be $35? Someone owned the stock already and paid $50. When they bought it, they wrote the option. What is there profit or loss at the time of the close out.
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:You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is
$40. The stock has a high standard deviation. It matures in 6 months and is selling for a premium of
$6. What is your profit or loss if the close out price turns out to be $35?
Someone owned the stock already and paid $50. When they bought it, they wrote the option.
What is there profit or loss at the time of the close out.
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