Question

Buying a Put Option: A put option trades on Swingline that has a strike price of $10.80 and a premium of $1.15. 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 $10.25.

$

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

Put options will be exercised, when the stock prices fall below the strike price. As the stock prices has fallen below the strike price, the out option will be exercised.

The put option strike price is = $10.8

Premium paid on the option is = $1.15

The stock price is $10.25

So, the pay off on the put option is ( $10.8 - $10.25 ) = $0.55

Now, as premium paid is $1.15, the net loss on the position is = -0.6