Kevin J. Berk

Kevin Berk

Initial Public Offering Put

Saturday, May 9, 2009
posted by kjberk

This would be a put option sold (to those who wanted to buy it) to the investors of an IPO.  This would allow some downside protection to the investors.  If the stock goes down, the value of the put goes up and offsets the loss.  It also potentially offers the underwriters some additional revenue, i.e. if the stock maintains its offer or goes higher the value of the option will go down and the underwriter will keep all the premium.

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