Hedge by purchasing put options

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Reference no: EM131888356

Suppose you own 779 shares of stock currently selling for $32 per share and want to hedge by purchasing put options. A put option is available today on the stock and has a premium of $7 and a delta of -0.7.

At the termination of the hedge, the stock is worth $28, and the put is worth $16.

Reference no: EM131888356

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