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 ago

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