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Suppose that you initiated a short position in stock X, selling when the market price was $75 per share. The stock price has fallen to $69 per share.

a. find out your current profit, and your maximum possible gain and loss

b. Now assume that you buy a put option to protect your position. Your put has a strike price of $69 per share, maturity of 6 months, and the per share premium is $2.95. What is your maximum possible gain and loss with the protective put?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M944707

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