Question
1) Suppose I sell 5 PUTs on Home Depot with a strike price of $180.00 and an option premium of $1.19. The stock price is
1) Suppose I sell 5 PUTs on Home Depot with a strike price of $180.00 and an option premium of $1.19. The stock price is $209.45 when I sell the PUT. The owner of the option chooses not to exercise it and it expires unused. What is my profit or loss on this?
| A. | $1.19 | |
| B. | $119.00 | |
| C. | $595 | |
| D. | $2,945 |
2) Suppose I sell 5 PUTs on Home Depot with a strike price of $180.00 and an option premium of $1.19. The stock price is $209.45 when I sell the PUT. The stock price drops to $170.00 a share and the owner of the option chooses to exercise it. What is my profit or loss on this? Assume that I have to buy or sell on the market.
| A. | $100.00 | |
| B. | $1,000.00 | |
| C. | $595 | |
| D. | $4,405.00 | |
| E. | None of the above |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Financial Economics
Authors: Zvi Bodie, Robert C Merton, David Cleeton
2nd Edition
0558785751, 9780558785758
