Protected put, Financial Management

Protected Put

A protected put would involve a long put and a long stock.

For example - ONGC.

Underlying stock = Rs. 809

Buy Mar Rs. 900 Put @ Rs.68.8

 

Total cost is Rs. 877.8

Maximum Profit: Unlimited

Maximum Loss: Limited

Strike Price - Stock Purchase Price + Premium Paid = 900 - 809 + 68.8 = Rs.159.8

This presents an arbitrage opportunity since the stock is purchased at Rs. 809 and if the Put option is still in-the-money at the expiry, an arbitrage of Rs.22.2 is available.

 

 

Posted Date: 7/25/2012 7:30:58 AM | Location : United States







Related Discussions:- Protected put, Assignment Help, Ask Question on Protected put, Get Answer, Expert's Help, Protected put Discussions

Write discussion on Protected put
Your posts are moderated
Related Questions
Assume that we have the following data: C=100+0.50Y Ip=100-20r Mt=0.10Y Ms=100-10r M=80 a. Build the IS-LM function. b. If we assume an increase in Investments by 100 units, p

QTL Tech has an issue of preferred shares outstanding with a $50 stated value that pays a dividend of 7.5%. There are 325,000 shares outstanding. QTL has not paid preferred share d

Q. Explain Rate of the stock turnover? Rate of the stock turnover: this is high degree of the inverse co relation between the quantum of the working capital requirement and the

Constant Duration To improve a buy and hold strategy a constant average duration is imposed for the managed portfolio during the full interest rate cy

State about the Financing MBO There are many sources of finances available for an MBO Venture capitalists Merchant banks Institutional investors such as pension funds

The minimum interest rate which investors demand for non-treasury securities is represented by the yield offered on the treasury securities. This is why market particip

As of November 1, 1999, the exchange rate in between the Brazilian real and U.S. dollar is R$1.95/$. The agreement forecast for the U.S. and Brazil inflation rates for the next 1-y

Explain the bird in the hand theory of cash dividends. The bird in the hand dividends theory state that dividends received now are better than a promise of future dividends.  U

The price charged when one segment of an organization provides goods or services to another segment of the organization.

Q. Consequence of the cash operating cycle? The cash operating cycle is the length of time among paying trade payables and receiving cash from receivables. It is able to be cal