Asked by Nicholas Malmquist on Jun 08, 2024
Verified
Justin Freez purchased a put option on General Auto's common stock at $2.90. The put has a striking price of $40 and General Auto's common stock is priced at $42.00. What is the most that Justin can lose on the put option purchase?
Put Option
A financial contract giving the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.
Striking Price
The predetermined price at which the holder of an option can buy or sell the underlying security.
- Determine the valuation of equities utilizing various methodologies and predict the return on investment in particular situations.
Verified Answer
LM
Liberty MachaconJun 10, 2024
Final Answer :
$2.90/share; which seems small, but is 100% of Justin's options investment.
Learning Objectives
- Determine the valuation of equities utilizing various methodologies and predict the return on investment in particular situations.