You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your...

Question

Question

You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your...

You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your maximum possible profit?

business finance

Add a comment Improve this question Transcribed image text

Answer 1

Answer #1

The put option is profitable if the stock price reduces below the strike price

Strike Price = X = $72

Premium Paid = P = $1.32

Let Stock Price = S

Profit = (X - S) - P

The profit is maximized when Stock Price S = 0

=> Max Profit = (72 - 0) - 1.32 = $70.68

Hence, profit per lot = 70.68*100 = $7,068

Add a comment

Answer 2

Similar Homework Help Questions

You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your...

You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your maximum possible profit? oL nrofits Potential profit
What is your maximum possible profit if you long one Apple, Inc. July 74 put contract...

What is your maximum possible profit if you long one Apple, Inc. July 74 put contract with a premium of $2.59?
You write one MBI July 120 put contract (equaling 100 shares) for a premium of $5....

You write one MBI July 120 put contract (equaling 100 shares) for a premium of $5. The option is held until the expiration date, when MBI stock sells for $123 per share. You will realize a ______ on the investment. Multiple Choice $300 loss $300 profit $500 profit $800 profit

You write one MBI July 120 put contract (equaling 100 shares) for a premium of $5....

You write one MBI July 120 put contract (equaling 100 shares) for a premium of $5. The option is held until the expiration date, when MBI stock sells for $123 per share. You will realize a ______ on the investment. Multiple Choice A) $500 profit B) $300 profit C) $800 profit D) $300 loss
Question 5 10 points Save Ans You buy one IBM July 90 call contract for a...

Question 5 10 points Save Ans You buy one IBM July 90 call contract for a premium of $4 each share and one put contract for a premium of $2 each share. You hold the position until the expiration date when IBM stock sells for $97 per share. What is your total profit or loss? Remember each contract has 100 shares Sethimet
An investor buys a 84 strike put option contract with a premium of 4.30 and writes...

An investor buys a 84 strike put option contract with a premium of 4.30 and writes (sells) an 80 strike put option contract for 2.20. What is the maximum profit per share? Maximum loss per share?

3 question (10%). Required: Draw a profit or loss graph for the purchase of put contract...

3 question (10%). Required: Draw a profit or loss graph for the purchase of put contract with exercise price of s30 for which a SS premium is paid a. b. Identify the break-even point, maximum profit, and maximum posses Dr.oec. A. Cirjevskis, professor 09.01.2019
Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017...

Microsoft (MSFT) + IMSETI Underlying stock price = $71.75 Expiration Strike Call Put June 16, 2017 70 2.02 0.24 June 16, 2017 72 0.67 0.90 June 16, 2017 74 0.132.37 70 July 7, 2017 July 7, 2017 July 7, 2017 72 2.400.58 1.15 1.32 0.42 2.59 74 Refer to Figure 15.1, which lists the prices of various Microsoft options. Use the data in the figure to calculate the payoff and the profit/loss for investments in each of the following July...
You establish a straddle on Walmart using September call and put options with a strike price of $64. The call premium is $4.95 and the put premium is $5.70 a. What is the most you can lose on this po...

You establish a straddle on Walmart using September call and put options with a strike price of $64. The call premium is $4.95 and the put premium is $5.70 a. What is the most you can lose on this position? (Input the amount as positive value. Round your answer to 2 decimal places.) Maximum loss b. What will be your profit or loss if Walmart is selling for $72 in September? (Input the amount as positive value. Round your answer...

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. Multiple Choice $600 loss Incorrect $200 profit $200 loss $300 profit

You purchase one Microsoft July $72 put contract for a premium of $1.32. What is your...

Homework Answers