Martin owns 15,000 shares of stock that he wants to sell sometime within the next three months. Shares of this stock are currently selling for $43.24. The stock has been increasing in price but Martin is concerned the price might start to fall. He is not yet willing to sell his shares just in case the price rises some more. To guarantee that he can receive at least $42.50 a share when he does sell, Martin could purchase _____ with a strike price of $42.50.

Question

Quizplus · Accepted Answer

Martin should purchase 150 puts with a strike price of $42.50 to ensure he can sell his 15,000 shares at that price. Each put option typically covers 100 shares, so 150 puts are needed for 15,000 shares.

Martin Owns 15,000 Shares of Stock That He Wants to Sell