Question
In: Finance
A trader buys 200 put options on a stock with a strike price of $100 when...
A trader buys 200 put options on a stock with a strike price of $100 when the option price is $3 and the stock price is $102. The trader holds the options to the maturity date when the stock price is $107. What is the trader’s net profit or loss?
Solutions
Expert Solution
Strike price = $100
Spot price = $107
option premium = $3
No of put options = 200
At expiry(maturity) date
Profit / Loss of the trader = (max(Strike price - Spot price, 0) - option premium) * No of put options
Profit / Loss of the trader = (max($100 - $107, 0) - $3) * 200
Profit / Loss of the trader = -$600
Loss of the trader = $600
jeff jeffy answered 2 years agoRelated Solutions
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