You want to buy an American Put on Apple (AAPL) with a strike price of $280....

You want to buy an American Put on Apple (AAPL) with a strike price of $280. Apple is currently trading for $282.12, has a u of 1.14, and a d of 0.88. The risk free rate is 1% per period. Use a two period binomial model. What is the most you should pay for that put?

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Solution.>

The price of the American Put is $15.70

I have solved it in Excel. If you still have any doubt, kindly ask in the comment section.

The formula used are:

Note: Give it a thumbs up if it helps! Thanks in advance!

jeff jeffy answered 1 year ago

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