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You have bought 1 share of stock for $41.94 and 1 put option on the...

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Finance

You have bought 1 share of stock for $41.94 and 1 put option on the same stock. This portfolio is called a protective put. The option has an exercise price of $40, costs $2.73, and expires in 8 months.

a)What is your profit from buying the stock if the stock price is $20 in 8 months (in $)? Ignore the option for now.

b)What is your profit from buying the option if the stock price is $50 in 8 months (in $)? Ignore the stock for now.

c)What is your total profit if the stock price is $100 in 8 months (in $)?

You have bought 1 share of stock for $66.05 and sold (wrote) 1 call option on the same stock. Such a portfolio is called a covered call. The option has an exercise price of $70, a price (premium) of $3.73, and expires in 5 months.

a)What is your profit from buying the stock only if the stock price is $20 in 5 months (in $)?

b)What is your profit from selling (writing) the option if the stock price is $50 in 5 months (in $)?

c)What is your total profit if the stock price is $100 in 5 months (in $)?

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