Disadvantages of technical analysis

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A. Discuss four (4) disadvantages of technical analysis?

B. Grace holds 600 shares of FGL. She bought the stock several years ago at $48.5 and the shares are now trading at $75.00. Grace is concerned that the market is beginning to soften. She doesn't want to sell the stock, but she would like to be able to protect the profits she's made. She decides to hedge his position by buying 6 puts on FGL. The three month puts carry a strike price $75.00 and are currently trading at $2.5.

i. How much profit or loss will Grace make on the deal if the price of FGL does indeed drop to $60.00 a share by the expiration date on the puts?

ii. How would she do if the stock kept going up in price and reached $90.00 a share by the expiration date?

iii. What do you see as the major advantages of using puts as hedge vehicles?

Reference no: EM132967354

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