What is the break-even point if a put option was purchased for a price of $.87,...

Question

Question

What is the break-even point if a put option was purchased for a price of $.87, with a strike price of $25. And the price at the expiration is $30?

A. $24.13

B. $24.15

C. $29.13

D. $25.87

Answer 1

Answer #1

Answer

Explanation

Break-even point is the share price at which the payoff to the holder and writer is zero

In a put option break-even point = strike price – option premium

Strike price = $25 (given in problem)

Option Premium = $.87 (given in problem)

Therefore break-even point = $25 - $.87

= $24.13

Answer 2

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