Indifferent between each portfolio

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Reference no: EM131814663

Use the following to answer the next two questions.

Alpha stock currently trades for $60/share. You believe that stock price will decrease in the near future and you are considering the following two portfolios to trade based on your belief:

1) Create a portfolio consisting of a position in 2500 shares of Alpha stock.

2) Create a portfolio consisting of a position in 25 3-month european put options. Each put option has a strike price of $64 and a premium of $6.

Which portfolio would you have been better off selecting if the Alpha sells for $57 when the options expire?

Portfolio 1

Portfolio 2

You'd be indifferent between each portfolio

Cannot be determined

Reference no: EM131814663

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