Modify Example 11.9 so that the portfolio now contains 100 shares of stock and one put option on the stock with the same parameters as in the example. You can assume that the price of an option is...

Modify Example 11.9 so that the portfolio now contains 100 shares of stock and one put option on the stock with the same parameters as in the example. You can assume that the price of an option is $81. Discuss in a brief memo how this portfolio differs from the portfolio in the example.

EXAMPLE 11.9 RETURN ON A PORTFOLIO WITH A STOCK AND AN OPTION ON THE STOCK

Suppose the investor buys 100 shares of AnTech stock at the current price and one call option on this stock for $475.94, the fair price found in the previous example. Use simulation to find the return on the investor’s portfolio as of the exercise date.

Objective To use simulation to evaluate a portfolio containing the stock and a call option on the stock.

WHERE DO THE NUMBERS COME FROM? Although simulation was used in the previous example to find the price of the option, this price is quoted publicly, as is the price of the stock.