Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. you are skeptical of the prospects of a particular

You are skeptical of the prospects of a particular technology stock. Therefore, you buy four put...

90.2K

Verified Solution

Question

Finance

You are skeptical of the prospects of a particular technologystock. Therefore, you buy four put option contracts on the stock.You pay a premium of $3 per share, and each contract involves100shares. The option’s strike price is $40. It has a maturity ofthree months. The firm is currently trading at $39. If yourintuition is correct, and the market price of the stock falls to$30, how much have you made?

Answer & Explanation Solved by verified expert
3.6 Ratings (607 Votes)
Solution Profit made when intuition is correct 2800 Working Notes In the given case you buy 4 put option Buyer of put option get right to sell shares at    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

You are skeptical of the prospects of a particular technologystock. Therefore, you buy four put option contracts on the stock.You pay a premium of $3 per share, and each contract involves100shares. The option’s strike price is $40. It has a maturity ofthree months. The firm is currently trading at $39. If yourintuition is correct, and the market price of the stock falls to$30, how much have you made?

Other questions asked by students

Q

Read the following case study: Swan is a 14-year-old student at the Sea-Cow School for the Performing...

Psychology
Q

Strategies in the Service Sector Select one of the following service sector industries: the health/fitness industry....

General Management
Q

Cash to Monthly Cash Expenses Ratio Amicus Therapeutics, Inc., is a biopharmaceutical company that develops drugs for...

Accounting
Q

Two point charges 8q and 2q are located at x 0 and x Lrespectively The...

Physics
Q

the scalar equation of the plane containing the following 3 points P 2 1 3...

Geometry
Q

Mr. Rivas bought a can of paint. He used of it to paint a bookshelf....

Basic Math
Q

Find the numerical value of each expression Round your answers to five decimal places a...

Calculus
Q

Hello. Please answer the following given questions with proper accuracy. Thanks. ...

Accounting
Q

Is the cost of direct Labor by unit and The % of the expected income...

Accounting
Q

The following selected items appeared in the adjusted trial balance columns of the worksheet for...

Accounting
Q

This is a conceptual question that does not require any calculation. Consider a project which...

Finance
Q

Gain or loss is determined by comparing the cash received and the market value of...

Accounting