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

Explain about the corporate reorganisations, Corporate Reorganisations ...

Corporate Reorganisations This topic deals principally with mergers and takeovers. It's very highly examinable. The discussion areas overlap with business strategy paper so don

Hedging, how does "x" company hegde itself? the company name will be shared...

how does "x" company hegde itself? the company name will be shared later.

Differance between forward start option and a package, 1 Explain the differ...

1 Explain the difference between a forward start option and a package. Outperformance certificates are offered to investors by many European banks as a way of investing in a com

Yield, Yield Yield represents the actual return on the investments. Dif...

Yield Yield represents the actual return on the investments. Different types of yield are discussed below: Coupon Yield: The fixed interest rate on a government security or

Define mutually exclusive projects, Provide three examples of mutually excl...

Provide three examples of mutually exclusive projects. Mutually exclusive projects are projects which participate against each other for our selection.  If a organization and fir

Portfolio Management, Portfolio Project The purpose of this project is to h...

Portfolio Project The purpose of this project is to help you to gain an understanding of how the stock market works and of the relationship between theory and practice. You are gi

Sources of return, When an investor invests in fixed income sec...

When an investor invests in fixed income securities, he receives returns from one or more of the following sources: Coupon Interest payment.

FDD , fimnancial accounting system

fimnancial accounting system

Define the financial leverage effect, What is the financial leverage effect...

What is the financial leverage effect and what causes it?  What are the potential benefits and negative consequences of high financial leverage? Financial leverage is the extra

Calculate the cost of capital of organization, The following particulars re...

The following particulars relate to ABC Ltd. at the end of 2008: (i)  Rs. 500,000 equity shares of Rs. 10 each. Present dividend per share is Rs. 15; Market price Rs. 100 per sh

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