Question

In: Finance

You have purchased a put option in a bond at a strike price of Rs 1000....

You have purchased a put option in a bond at a strike price of Rs 1000. Later, the market price of the bond settles at Rs 1100. What is the best course of option for you? Select one:

a. You exercise your option: by buying the bond @ Rs 1000

b. You exercise your option: by selling the bond @ Rs 1000

c. None of these

d. Do not exercise your option

Solutions

Expert Solution

Option d is correct.

You don't excercise your option

You have taken a long put which means you have to purchase the bond at spot price i.e, 1100. This makes you loss and however, put Option will give you right to excercise but not the obligation. Therefore to avoid the loss, you don't excercise the put Option

jeff jeffy answered 2 years ago
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