Buying a Put Option: A put option trades on Swingline that has a strike price of...

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Buying a Put Option: A put option trades on Swingline that has a strike price of...

Buying a Put Option: A put option trades on Swingline that has a strike price of $10.85 and a premium of $1.00. Calcuate the net profit or loss from BUYING a PUT option on Swingline if at the time of expiration the price per share of Swingline is $10.30.

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Answer 1

Answer #1

Ans : Price of share at expiry = $ 10.30

Put option is exercised if share price is below the strike price. In this case, Share price ($10.30) is less than Strike price ($ 10.85)

Net profit/Loss on exercising put option = Strike price - stock price - Premium paid

= $ 10.85 - $ 10.30 - $ 1

= - $ 0.45

Net loss of 0.45 from buying put option.

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Answer 2

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