Homework answers / question archive / (a) Vince longs a put option on Junebank's stock with a strike price at RM13

(a) Vince longs a put option on Junebank's stock with a strike price at RM13

Finance

Share With

(a) Vince longs a put option on Junebank's stock with a strike price at RM13. Currently Junebank's stock is priced at RM15 and the option premium is RM1.50. (i) Advise Vince whether or not to exercise the option. Justify your answer. (2 marks) (ii) Draw an expiry profit diagram for the Junebank's position. (6 marks) (iii) Explain the profit and loss for Vince and Junebank. (2 marks) (iv) What would be the profit and loss for both parties if the stock price decreases to RM11? (4 marks)