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QUESTION
Assume that currently FIRM A, FIRM B and FIRM C stocks prices are $150, $100 and $50 respectively. The index, which is a simple average of these...
Assume that currently FIRM A, FIRM B and FIRM C stocks prices are $150, $100 and $50 respectively. The index, which is a simple average of these three stocks, is at $100.
(1) purchasing three put options on the index with a strike of $100
(2) purchasing one put option on FIRM A with a strike of $150, one put option on FIRM B with a strike of $100 and one put option on FIRM C with a strike of $50.
If both (1) and (2) have the same price, which would you recommend?
