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
Ans A.$200 profit
At the expiration date, stock price sells for less than the Put rate. So, the buyer of the contract will exercise the option.
Profit to seller = (Premium taken + (Expiration price - Put price) ) * 100
= (4 + ( 118 - 120) ) * 100
= $ 200
You write one Chih, Inc. April 120 put contract (equaling 100 shares) for a premium of...
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