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

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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?

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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
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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?

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