Question

Buying a Put Option: A put option trades on Swingline that has a strike price of $10.80 and a premium of $1.20. Calcuate the net profit or loss from BUYING a PUT option on Swingline if at the time of expiration the price per share of Swingline is $10.15.

$

Place your answer with dollars and cents without a dollar sign. Enter negative answers with a "minus" sign. For example, if your answer is negative two dollars and seventy five cents, then enter -2.75.

Answer 1

Ans : Price of share at expiry = $ 10.15

Put option is exercised if share price is below the strike price. In this case, Share price ($10.15) is less than Strike price ($ 10.80)

Net profit/Loss on exercising put option = Strike price - stock price - Premium paid

= $ 10.80 - $ 10.15 - $ 1.2

= - 0.55

Net loss of 0.55 from buying put option. That is -0.55