Question

1.An investor buys stock for $1 million on July 23, 2017 and on the same day...

1.An investor buys stock for $1 million on July 23, 2017 and on the same day buys a put on the same stock with a strike price of $1 million for $150,000. On December 15, when the stock is worth $1,100,000 the investor sells the put for $25,000. On December 31, the fair market value of the stock is $1,070,000. The put and the stock constitute a straddle.

a.How much loss was realized on the sale of the put?

b.How much loss can be recognized?

c.What is the holding period of the stock on Dec. 31, 2017? 16 days

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