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Explain whether the superannuation fund will exercise option

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Reference no: EM133011562

A superannuation fund is holding a large number of National Bank Limited shares in an investment portfolio and wishes to protect the value of the investment. The National Bank Limited shares currently trade at $24.49. The superannuation fund buys a put option with an exercise price of $24.00 per share and a premium of $0.95 per share

Problem a. What is a put option?

Problem b. By entering into this option strategy, explain whether the superannuation fund will exercise the option if the spot price is above or below the exercise price.

Reference no: EM133011562

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