Protective put purchasing strategy

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Reference no: EM131593720

You buy the stock at a price of $33 and at the same time you buy a put option with an exercise price of $30, paying a premium of $ 1.

What is your total cost at the beginning?

If the stock price falls to $20 and you exercise the put, what would be your final wealth in this example (how much money will you have)?

What is your maximum total loss in dollars if the stock price falls to $20 in the market, given this protective put purchasing strategy?

What is your maximum total loss in percentage?

What would your final wealth be if the company goes bankrupt and thus you’d see the price of the stock being equal to zero in the stock market?

Reference no: EM131593720

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