When will the investor break even on the put option?
The investor will break even when the price of XYZ is at $38.75 ($37 purchase price of the stock + the 1.75 premium on the put). An investor is long 1,000 shares of XYZ at $32 per share and the current market value of XYZ is $38.
How many shares of ABC did the investor purchase on March 9?
On March 9, an investor purchased 1,000 shares of ABC at $20 and then on July 20, the investor purchased an additional 1,000 shares of ABC at $12. On May 11 of the following year, the investor sold 1,000 shares of ABC at $25.
What is the buyer's breakeven point at $44 and $56?
This equals a breakeven of $56. The customer also has the right to sell the stock to the writer at $50, but has paid a $600 premium. The breakeven point on the put would be six points below the strike price of $50, which equals $44. The buyer's breakeven points, therefore, will be $44 and $56.
How long does an investor need access to the funds?
An investor with an investment objective of tax-exempt income will need access to the funds in four months. An RR should NOT recommend which of the following municipal securities? In a rights offering, an underwriter offers to purchase all the shares the issuing corporation may not be able to sell.
Which of the following would establish a covered put?
Which of the following would establish a covered put? A covered put is created when a short stock is combined with a short put. Covered puts are established when the investor is neutral or slightly bearish; therefore, the strike price of the put is less than the cost of the stock sold short.
What is a bull put option?
A bull put spread consists of one short put with a higher strike price and one long put with a lower strike price. Both puts have the same underlying stock and the same expiration date.
Which of the following statements is true when comparing the purchase of a put and selling a security short?
Which of the following statements is TRUE when comparing the purchase of a put and selling a security short? The best answer is C. The maximum potential loss when buying a put is just the premium paid, whereas in selling a security short, the individual is exposed to an unlimited loss potential.
Which of the following would protect a short May 50 put?
For a long call to cover a short call, it must have the same or lower strike price and the same or longer expiration. This ensures the investor may purchase the stock without financial loss and deliver it at 50 if the short call is exercised. Which of the following would protect a short May 50 put? A)Long June 55 put.
What is a put in stocks?
A put is an options contract that gives the owner the right, but not the obligation, to sell a certain amount of the underlying asset, at a set price within a specific time. The buyer of a put option believes that the underlying stock will drop below the exercise price before the expiration date.
What is a bull put spread example?
For example, if a bull put credit spread is opened with a $50 short put and a $45 long put, and the underlying stock price is below $45 at expiration, the broker will automatically buy shares at $50 and sell shares at $45.
What is call & put option with example?
If you buy an options contract, it grants you the right but not the obligation to buy or sell an underlying asset at a set price on or before a certain date. A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock.
What is put option with example?
Example of a put option By purchasing a put option for $5, you now have the right to sell 100 shares at $100 per share. If the ABC company's stock drops to $80 then you could exercise the option and sell 100 shares at $100 per share resulting in a total profit of $1,500.
What is put buy and put sell?
Put options are a type of option that increases in value as a stock falls. A put allows the owner to lock in a predetermined price to sell a specific stock, while put sellers agree to buy the stock at that price.
What is a $50 put?
Understanding a Long Put That means the put option entitles that trader to sell the stock at $50, even if the stock drops to $20, for example.
What is a short put strategy?
Key Takeaways. A short put is when a trader sells or writes a put option on a security. The idea behind the short put is to profit from an increase in the stock's price by collecting the premium associated with a sale in a short put. Consequently, a decline in price will incur losses for the option writer.
How does a put work?
Key Takeaways A put option is a contract that gives its holder the right to sell a number of equity shares at the strike price, before the option's expiry. If an investor owns shares of a stock and owns a put option, the option is exercised when the stock price falls below the strike price.