Maximum potential profit from this option strategy

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Suppose Megan purchases 100 shares of Goodyear Tire stock for $32.84 and at the same time she also buys a single put option that has a strike price of $30. The put option is currently selling for $1.55. (a) What is the option strategy that Megan has decided to employ? What would be the reason Megan would want to employ this strategy? (b) What is Megan’s total profit (or loss) from the option strategy if the price of the stock is $26, $30 or $40 in 12 months? (c) At what price of the stock will Megan break even? (d) What is the maximum potential loss and maximum potential profit from this option strategy?

Reference no: EM131990614

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