Assume we are in July, 2023. In July of 2023, the share prices of company B are $80 per share. You believe they should be $30 per share, and are thus overvalued. December 2023 put options on a strike price of $60 per share are currently valued at $5. Each put contract is based on 100 shares. a.) What is the intrinsic value of the put option per share? b.) What is the time value of the put option per share? c.) If we arrive at expiry in December and you are proven correct with the share prices of company B selling for $30, what is your net dollar profit on a single put options contract in dollars, remembering that the put option is based on a contract of 100 shares
Assume we are in July, 2023. In July of 2023, the share prices of company B are $80 per share. You believe they should be $30 per share, and are thus overvalued. December 2023 put options on a strike price of $60 per share are currently valued at $5. Each put contract is based on 100 shares.
a.) What is the intrinsic value of the put option per share?
b.) What is the time value of the put option per share?
c.) If we arrive at expiry in December and you are proven correct with the share prices of company B selling for $30, what is your net dollar profit on a single put options contract in dollars, remembering that the put option is based on a contract of 100 shares.
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