You sell a put option on one share of stock. The put has a premium of...
You sell a put option on one share of stock. The put has a premium of $4 and a strike/exercise price of $98. The stock currently has a price of $101.20 per share. On the day that the option expires, the stock is selling for $94. What ends up being your net payoff on this position?
Homework Answers
Loss from put option expiring in the money = final price - strike price = 94 - 98 = $4
option premium earned = $4
Hence total gains made = option premium + loss from put option = 4 - 4 = $0
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