What is the break-even stock price for the protective put?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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What is the break-even stock price for the protective put? R

Mr. Green believes that the stock "Future LTD" will appreciate in value. The current price of Future LTD is R60. His friend advises him that a protective put
strategy will allow Mr Green to achieve his objective while limiting the downside risk if the share price of Future Ltd depreciates.
Use the following information from the option quote to construct a protective put strategy at an exercise price of 55 and answer the questions that follow.
Note: with respect to premium quotation, 1 contract = 100 options
Put
Call
Premium (Contract)
560
Premium (Contract)
Spot
60
Expiry
Mar
Strike
55
108
K
Transcribed Image Text:Mr. Green believes that the stock "Future LTD" will appreciate in value. The current price of Future LTD is R60. His friend advises him that a protective put strategy will allow Mr Green to achieve his objective while limiting the downside risk if the share price of Future Ltd depreciates. Use the following information from the option quote to construct a protective put strategy at an exercise price of 55 and answer the questions that follow. Note: with respect to premium quotation, 1 contract = 100 options Put Call Premium (Contract) 560 Premium (Contract) Spot 60 Expiry Mar Strike 55 108 K
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