Suncor Energy Inc. (SU) shares are listed on the New York Stock Exchange. At 9:30 a.m. on January 14, 2016, these shares sold for $21.85 per share. The volatility on the returns of Suncor shares is approximately 24%. The following call and put option contracts were available for the months of January, February, and March:
|
CALLS |
||
Strike/Expiry |
January 22, 2016 |
February 19, 2016 |
March 18, 2016 |
23 |
0.34 |
0.72 |
0.96 |
24 |
0.13 |
0.41 |
0.69 |
25 |
0.25 |
0.26 |
0.40 |
|
PUTS |
||
Strike/Expiry |
January 22, 2016 |
February 19, 2016 |
March 18, 2016 |
23 |
1.28 |
2.01 |
2.14 |
24 |
2.63 |
2.80 |
2.92 |
25 |
3.60 |
3.70 |
3.95 |
Each option contract involves 100 shares. The risk-free rates for these three expiration dates are 0.6%, 1%, and 1.2%. All three rates are continuously compounded.
Given the information on Suncor shares and options above, construct a protective put using the 23-put with February expiration. Hold the protective put position until expiration.
e. What is the maximum
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