Question
Today you are selling a put option on ABC stock. The put option has a strike price of $42, 9 months to expiration, and currently
Today you are selling a put option on ABC stock. The put option has a strike price of $42, 9 months to expiration, and currently trades at a premium of $7 per share. Today you are buying a put option on ABC stock. The put option has a strike price of $26, 9 months to expiration, and currently trades at a premium of $10 per share. If at maturity the stock is trading at $26, what is your net profit on this position? Keep in mind that one option covers 100 shares (multiply profit per share by 100).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
To calculate the net profit on these put options we need to consider the premiums paid and received ...
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Step: 2
Step: 3
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Fundamentals Of Investing
Authors: Scott B. Smart, Lawrence J. Gitman, Michael D. Joehnk
14th Edition
0135175216, 978-0135175217
