Question

5. You sold five put contracts on CTB stock at an option price per share of $1.90. The options have an exercise price of $45 per share. The options were exercised today when the market price was $39 a share. What is your net profit or loss on this investment? Ignore transaction costs and taxes.-$410-$2,050$3,000$2,850$3,950

Answer 1

Answer:

b. -$2050

Explanation:

Option Price = $1.90

Number of Options sold = 5

Exercise price = $45

Stock price = $39

The exercise price is higher than stock price. The put option is in the money and thus the purchaser of put option will exercise the option

The lot size is 100 shares and thus the loss will be as shown below:

Total loss = -((45-39)*5 - $1.90*5) *100

Total loss = -$2050