You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of $4. You hold the option until the expiration date, when Chih stock sells for $118 per share. You will realize a ______ on the investment.
Multiple Choice
$600 loss
Incorrect$200 profit
$200 loss
$300 profit
You are a writer of a put option. So premium is your income
Your income = 4 x 100 = 400
Now, you have negative payoff if price decreases and zero payoff if price increases beyond strike price 120.
Now, here price on expiry is 118, so payoff will be negative
Payoff = price on expiry - strike price = 118 - 120 = -2 x 100 = -200
Profit or loss = Payoff + premium = - 200 + 400 = 200
So there is a profit of 200
Answer : $200 profit (Thumbs up please)
You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of...
You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of $4. You hold the option until the expiration date, when Chih stock sells for $118 per share. You will realize a ______ on the investment. A.$200 profit B.$600 loss C.$200 loss D.$300 profit
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