Suppose that you have taken a long position on a put option. The strike price is...

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Suppose that you have taken a long position on a put option. The strike price is...

Suppose that you have taken a long position on a put option. The strike price is $125, and the option premium / price is $10. When the option expires, the value of the underlying asset is $90. What is your pay-off and profit / loss?

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Answer 1

Answer #1

Since the value of underlying assets is less than strike price of the option.

The option will not be exercise.

Payoff = Call payoff per share = MAX (stock price - strike price, 0)

=Max ($90-125,0)

=0

The loss would be = $10 ( premium paid on option)

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Answer 2

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