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Determine felix profit or loss

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Reference no: EM133305579

Chris Felix is considering purchasing 100 shares of Rattle Bird Company's stock at a current price of $50 per share. However, Felix is afraid that the price of Rattle Bird's stock could fall in the 2 months after he buys it. A current 3-month at-the-money put option for Rattle Bird is selling for a $2 premium per share.

1. What profit or loss will Felix make if he purchases Rattle Bird's stock for $50 per share and the price of Rattle's stock falls in 1 month to $40 per share without a protective put?

2. Determine Felix's profit or loss if he had purchased the $2 at-the-money put.

Reference no: EM133305579

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