You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is $40. The stock has a high standard deviation. It matures in 6 months and is selling for a premium of $6. What is your profit or loss if the close out price turns out to be $35? Someone owned the stock already and paid $50. When they bought it, they wrote the option. What is there profit or loss at the time of the close out.

You are looking at the purchase of a put option. The stock is selling for $50. The exercise price is $40. The stock has a high standard deviation. It matures in 6 months and is selling for a premium of $6. What is your profit or loss if the close out price turns out to be $35? Someone owned the stock already and paid $50. When they bought it, they wrote the option. What is there profit or loss at the time of the close out.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter20: Financing With Derivatives

Section20.A: The Black-scholes Option Pricing Model

Problem 1P

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