Question

you currently own IBM stocks. If you purchase put options on this stock to protect against...

you currently own IBM stocks. If you purchase put options on this stock to protect against future declines in the price of the stock, you are implementing _____.

A. naked call                                                        C. protective put

B. bear spread                                                D. covered call

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

A protective put strategy is when the options trader is still bullish on a stock he already owns but wary of uncertainties in the near term. The hedging strategy involves an investor buying a put option for a fee, called a premium.

Option C is correct. Protective Put.

NOTE: The answer to your question has been given below/above. If there is any query regarding the answer, please ask in the comment section. If you find the answer helpful, do upvote. Help us help you.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You currently own one share in IBM. The current share price (stock price) is 50. You...
You currently own one share in IBM. The current share price (stock price) is 50. You begin to notice mixed signals about IBM’s future and you fear that stock prices might fall. You want to hedge against this possibility while being able to profit from further share price increases. Call options for 1 share in IBM and a strike price of 50 are trading on the exchange for a premium of 5. Put options for 1 share in IBM and...
Currently you own no stock options Today’s data for Green Corporation, where the call and put...
Currently you own no stock options Today’s data for Green Corporation, where the call and put have the same exercise price and expire in one year: strike price 32.50 put price 2.85 call price 1.65 stock price 30.00 If you construct a protective put strategy, which securities will you buy or sell, and what is your total investment today? If stock price is $20 on the expiration date what will be the value of your portfolio (payoff) on that day,...
Part A) Using options on an asset you don’t own is called: A) speculation. B) a...
Part A) Using options on an asset you don’t own is called: A) speculation. B) a naked position. C) hedging. D) a covered position. Part B) You are short both a put option and a call option on Rockwood stock with the same expiration date. The exercise price of the call option is $40 and the exercise price of the put option is also $40. Graph the payoff of the combination of options at expiration.
) You invest in the stock of Valleyview Corp. and purchase a put option on Valleyview...
) You invest in the stock of Valleyview Corp. and purchase a put option on Valleyview Corp. This strategy is called a ________. A) long straddle B) naked put C) protective put D) short stroll
You purchase 100 put options on a stock with exercise price of $52 at a premium...
You purchase 100 put options on a stock with exercise price of $52 at a premium of $4.30 per put. You also purchase 100 call options on the same stock with exercise price of $54 and call premium of $5.10 per call. If at expiration of the options (the options expire on the same date), the stock's price is $52.79, calculate your profit. According to put-call parity, the present value of the exercise price is equal to the: A. Stock...
To protect an existing stock position, some traders like to use a position known as a...
To protect an existing stock position, some traders like to use a position known as a collar. When traders have a long position in the stock, they create the collar by combining covered calls and protective puts. Therefore the upside potential is limited beyond the strike price of the short call while the downside is protected by the long put. Suppose you purchased 100 shares of stock ABC at $13 in May and would like a way to protect your...
2. Suppose you purchase a put option to sell IBM common stock at $100 per share...
2. Suppose you purchase a put option to sell IBM common stock at $100 per share in September. The current price of IBM is $85 and the option premium is $10. a. What is the intrinsic value of this option? As the expiration date on the option approaches, what will happen to the size of the option premium? b. What would be in intrinsic value if this was a call option?
Assume that IBM stock is currently selling for $50 per share.  Assume that you will purchase 200...
Assume that IBM stock is currently selling for $50 per share.  Assume that you will purchase 200 shares. You have $3,000 of your own to invest and you will borrow an additional $7,000 from your broker at an interest rate of 5% per year (assume no service charge for the loan).  The Maintenance Margin is 20%.   If IBM’s stock price falls to $40 per share over the year (at the end of the year), what is your rate of return if you buy...
Jacob currently does not own AAPL but would like to buy some at a lower price....
Jacob currently does not own AAPL but would like to buy some at a lower price. He could conceivably buy the stock at his price and make a few dollars for his trouble by a. selling naked puts at a strike price lower than the current price. b. selling covered puts at a strike price lower than the current price. c. selling covered calls at a strike price lower than the current price. d. buying naked calls at a strike...
Consider the following options portfolio. You write an August expiration call option on IBM with exercise...
Consider the following options portfolio. You write an August expiration call option on IBM with exercise price $150. You write an August IBM put option with exercise price $145. a. Graph the payoff of this portfolio at option expiration as a function of IBM’s stock price at that time. b. What will be the profit/loss on this position if IBM is selling at $153 on the option expiration date? What if IBM is selling at $160? Use the data in...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT