You have purchased a put option on Kimberly Clark common stock. The option has an exercise price

Question:

You have purchased a put option on Kimberly Clark common stock. The option has an exercise price of $95.00 and Kimberly Clark’s stock currently trades at $96.18. The option premium is $1.25 per contract. (LG 10-4)

a. Calculate your net profit on the option if Kimberly Clark’s stock price falls to $93.00 and you exercise the option.

b. Calculate your net profit on the option if Kimberly Clark’s stock price does not change over the life of the option.

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