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
Acquisition (takeover) or merger A merger is the synergy or combination of two companies which are roughly equal in size by consensus of two organisations. A takeover is where

Weighted Average Cost of Capital Weighted average cost of capital is the average cost of the costs of several sources of financing. Weighted average cost of capital is also kn

On 1 July 2006, Goela Ltd was registered and offered 1 000 000 ordinary shares to the public at an issue price of $1.70, payable as follows: 50c on application (due 31 August)

If normal operating revenues are inadequate to repay the debt, liquidation of collateral may be necessary. Corporate bonds can be either secured or unsecured by c

QUESTION (a) "A promissory note is an instrument in writing (not being a blank or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certai


Project Budgets and Reporting Systems: In many cases, where a project is initiated and a budget allocated, a separate account is created to ensure costs attributable to that pr

Q. The main rationale for the objective of wealth maximization is that it shows the most efficient use of the society's economic resources and therefore leads to a maximization of

Q. Show the Supposition of MM Hypothesis? Supposition of MM Hypothesis:- (i) There are ideal capital markets. (ii) Investors act rationally. (iii) Information regardin

Is the net income of a year the money the company made that particular year or is it a number whose significance is quite doubtful? The net income of a year is not money that a