# Acer Stock

## Question

A put option on Acer stock currently has a price of \$2, a strike price of \$40 and an expiration date in 30 days. If Ms. Jordan buys a share of Acer stock at \$40 and a put option contract on Acer stock, plot the profit (Y axis) of this combined position against the stock price (P; X axis). Show all the calculations and key points. Comment on the result.

## Solution Preview

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The details have been given as:
Strike price of option = \$40
Price of put option = \$2
Purchase price of stock = \$40.
There are three options upon expiration:
• The closing price is less than \$40
• The closing price stays at \$40
• The closing price is more than \$40....
\$8.00 for this solution

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