Khalid is a hedge fund investor at Puma Asset Management Company. He purchased stock index fund,...

Khalid is a hedge fund investor at Puma Asset Management Company. He purchased stock index fund, currently selling at SR1, 200 per share. To protect against losses, Khalid pay put option premium for SR200 with exercise price of SR1, 200 and 3-month time to expiration. Ali is Khalid financial advisor point out that Khalid spends too much on the put options. He told Khalid to buy call options with strike price SR1, 200 and premium at 200 with same expiration date. Ali will go with call option strategy.

Analyze by fill in the following table for Khalid’s and Ali’s strategies if the stock index price reached SR800, SR1, 000, SR1,200, SR1400, SR1500.

Khalid’s strategy – put option

Ali’s strategy – Call option

Stock price ($)/market value	800	1000	1200	1400	1500
Exercise price
Option value
premium
Profit

Stock price ($)/market value	800	1000	1200	1400	1500
Exercise price
Option value
premium
Profit

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jeff jeffy answered 1 year ago

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