R28 BB4 - is this example implied buy an in-the-money put?

Spot price: 0.875

Put Stirke: 0.9

Why example shows buying an in-the-money put?

(spot) price is below strike, so you can sell the underlying for .9 instead of .875…OR buy the underlying for .875 and sell it for .9…so you are in the money

Why CFA give us buy in the money put example?

Buy ITM put should be very rare?

Why not :wink:

Expensive but immediate downside protection.

Then buy ATM put is enough. Is it common to buy ITM put?

ITM put --> higher downside protection.

The effect of ITM and ATM downside protection is the same…

If would disagree.

Stock price: 10

ITM option with strike 11: downside protection from 11 to 0 --> immediate protected for all 10 and you would loose premium paid

OTM option with strike 9: downside protection from 9 to 0 --> you would loose 1 + premium paid