12 Suppose that a September put option with a strike price of $130 costs $13.0. Under...

Suppose that a September put option with a strike price of $130 cost $13. Under what circumstances will the seller of the option earn a profit.

Answer : S > 117

Put sellers maximum profit is limited to premium he have earned. Put seller break even point is strike - Premium in our example 130-13 = 117. Hence when the spot price goes below 117 then the losses for seller will start.

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