An investor buys 100 shares of IBM stock at the price of $200, and a put option of selling one hundred shares at a price of $202. The option price is $3 for each share. If the stock price rose to $210...
An investor buys 100 shares of IBM stock at the price of $200, and a put option of selling one hundred shares at a price of $202. The option price is $3 for each share. If the stock price rose to $210 and the investor let the option expire, what would be the gain?
Homework Answers
Gain = number of shares*(Current price-purchase price + Max(strike price-current price,0)-option price)
=100*(210-200+Max(202-210,0)-3)
=100*(10+0-3)=700
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