Suppose stock price S=50, put option price P= $2.00 for 6 mo maturity and exercise...
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Suppose stock price S put option price P $ for mo maturity and exercise price E$ You buy shares now. You believe there is a chance the stock price will increase to $ and chance it will decline to $ in the next months. How can you hedge against a decline in stock price by using options? Calculate the potential benefit or loss from hedging. What is the benefitloss if the probabilities are for increase and for decrease.
Suppose stock price S put option price P $ for mo maturity and exercise price E$ You buy shares now. You believe there is a chance the stock price will increase to $ and chance it will decline to $ in the next months. How can you hedge against a decline in stock price by using options? Calculate the potential benefit or loss from hedging. What is the benefitloss if the probabilities are for increase and for decrease.
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