You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of...

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You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of...

You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of $4. You hold the option until the expiration date, when Chih stock sells for $118 per share. You will realize a ______ on the investment.

A.$200 profit

B.$600 loss

C.$200 loss

D.$300 profit

business finance

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Answer 1

Answer #1

Ans A.$200 profit

At the expiration date, stock price sells for less than the Put rate. So, the buyer of the contract will exercise the option.

Profit to seller = (Premium taken + (Expiration price - Put price) ) * 100

= (4 + ( 118 - 120) ) * 100

= $ 200

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Answer 2

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