Suppose you are considering buying a put option on Coca Cola (KO) stock. The stock price on November 3, 2020 was $49.37 and the put option premium quoted on a 05/21/2021 50 P was $4.45. Suppose you purchased one put option contract on November 3, 2020. (a) Suppose that 6 months later the stock price is $52. The option contract has decreased along with the stock price and is now worth $3.95. What will you do? (b) Suppose that on expiration day the stock is trading at $53. What is your profit (or loss)? (c) Suppose that on expiration day the stock price sinks to $49. What is your profit (or loss)?

Suppose you are considering buying a put option on Coca Cola (KO) stock. The stock price on November 3, 2020 was $49.37 and the put option premium quoted on a 05/21/2021 50 P was $4.45. Suppose you purchased one put option contract on November 3, 2020. (a) Suppose that 6 months later the stock price is $52. The option contract has decreased along with the stock price and is now worth $3.95. What will you do? (b) Suppose that on expiration day the stock is trading at $53. What is your profit (or loss)? (c) Suppose that on expiration day the stock price sinks to $49. What is your profit (or loss)?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter5: Financial Options

Section: Chapter Questions

Problem 4MC

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