Series 7 / CFA: option payoffs
The Floor Under the Stock
Buy a share at fifty and a forty-five put for two. A three-minute film that lays the stock's line on the put's line and watches a floor appear at minus seven, then sells a call instead and watches the floor become a ceiling.
This browser has 3D graphics turned off, so the set cannot be drawn. The math and the narration still play.
The problem
An investor buys a share of stock at $50 and buys a $45 put for $2. At expiration, the maximum loss per share is: (A) $2 (B) $5 (C) $7 (D) unlimited
(C) $7: the fall from 50 to the 45 strike, plus the $2 premium; breakeven is $52
