Explain briefly why this strategy may make sense

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This question may help you many years down the road! Time flies!! Imagine  you  have become 65 years old and you plan to retire next year. You expect to have $1,000,000 in your 401K. You buy 50 contracts of put options on SPY at a strike price of $2,200 per share. You paid a total premium of $25,000 for all the put options you bought. When you exercise your put option, the price of SPY per share is down by 20% and the total value of your portfolio (401k) declines by 15%.

a. Explain briefly why this strategy may make sense.

b. What is your total loss without this strategy?

c. What is your total net loss or total net profit (your portfolio and options all together) with this strategy?

Reference no: EM131487083

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