Protected put, Financial Management

Assignment Help:

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.

 

 


Related Discussions:- Protected put

Multi-period compounding or else future value, Multi-period Compounding or ...

Multi-period Compounding or else Future Value :- If the company determination compounding interest half-yearly (semi-annually) instead of annually then investors will gain as he wi

European community, European Community (EC) An economic alliance, evalu...

European Community (EC) An economic alliance, evaluated in 1957, designed to encourage trade and economic cooperation between its members.  The EC is also called the European

Show the difference between revenues and costs, • Sales revenue line drawn ...

• Sales revenue line drawn and labelled correctly and accurately • Fixed cost line (at $1,020) labelled and drawn accurately and correctly • Total costs line (starting at $1,

Explain the role of commission authorities, Explain the Role of commission ...

Explain the Role of commission authorities Competition Directorate is one of the independent public bodies which help ensure healthy competition between companies which then be

Define is it preferable to use an import quota or a tariff, Suppose the gov...

Suppose the government wants to limit imports of a certain good.  Is it preferable to use an import quota or a tariff?  Why? Modification in domestic consumer and producer surp

Calculate the forward exchange rate, (a) A debt of $3600 with interest at 6...

(a) A debt of $3600 with interest at 6% compounded semiannually is to be amortized by semiannual payments of $900 each, the rst due in 6 months, together with a nal partial payme

Explain the structure of financial systems, Explain the structure of financ...

Explain the structure of financial systems In direct finance borrower-spenders borrow funds straight from lenders in the financial markets by selling them securities. In indire

Calculate the net present value-investment proposal, As you checked the Ans...

As you checked the Answer Key to Question 6 in the Mastery Check from this lesson you may have noted that each year's net cash flows are calculated by adding depreciation back to n

What is substantive test, what is Substantive tests or transactions based a...

what is Substantive tests or transactions based auditing Tests to attain audit evidence to detect material misstatements in financial statements. Using analytical procedures an

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd