3. Joe Brown purchased a put option on ABC stock with a strike price of...
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3. Joe Brown purchased a put option on ABC stock with a strike price of $593 for a premium of $3 per share.
1) Before the option expires, ABC stock price is $588. Will Joe strike or not? What would be his profit/loss? What is the return rate on his investment on the option trading (ignore the money used in purchasing stocks)?
2) Assume instead, the price of ABC stock is $597. Will he strike or not? What would be his profit or loss from the option trading?
3) What is the maximum stock price at which Joe should exercise the put option?
4) At what stock price will Joe breakeven (profit/loss=0)?
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