An investor buys 100 shares of Abbott Labs at $85 and buys one $75 put on...

An investor buys 100 shares of Abbott Labs at $85 and buys one $75 put on Abbott for $2.
1. If Abbott goes to zero, what is the profit or loss on these positions?
2. If Abbott goes to $100 on the option expiration date, what is the investor’s dollar gain or loss on these positions?
3. What option strategy would the investor take if he did not want to pay for the put? What are the disadvantages of this strategy?

Expert Solution

jeff jeffy answered 4 months ago

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