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When ABC was trading at $52 per share, you wrote a put that you sold for...

When ABC was trading at $52 per share, you wrote a put that you sold for $4.20 (for one share) on the stock of ABC with a strike price of $50, and six months until maturity. After six months, the share price of ABC is $49. What is your profit or loss? Losses should be entered as negative numbers. Do not include the $ sign and answer to the nearest $0.01.

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Answer #1

Strike Price = $ 50

Price at expiry = 49

In this situation the put buyer will excercise the option so buyer will sell the stock at 50 and i have the obligation as a writer to buy the share @ 50

Profit of Put Writer = Sold in Market Price - Purchase at strike Price + Premium

= 49 - 50 + 4.20

=$ 3.20

Profit to put writer of $ 3.20

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