3. Consider buying a Put option on SIB stocks to insure a 310 lakh investment...
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3. Consider buying a Put option on SIB stocks to insure a 310 lakh investment in SIB, which is currently at 8300 per share. The purpose of this insurance is to guarantee that six months from now, my investment will be worth at least 39.5 lakhs a) Given the following strikes and the corresponding premiums, which put contract should I use to get the required insurance? Strike 8000 8100 8200 8300 8400 8500 8600 8700 Premium 118.80 179.90 248.00 315.00 395.00 436.60 475.05 505.05 b) How many Stocks of SIB should I purchase? c) How many Put contracts should I purchase? d) With this strategy, will your portfolio be still insured at 59.5 lakhs? Answer this by computing the insurance level realized by this strategy
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