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Three months ago, CSG stock was selling for $44.25 a share. At that time, you purchased...

Three months ago, CSG stock was selling for $44.25 a share. At that time, you purchased three put options on the stock with a strike price of $45 per share and an option price of $1.75 per share. The option expires today when the value of the stock is $42.50 per share. What is your net profit or loss on this investment? Ignore commissions and taxes. Round the answer to the nearest dollar. Enter as positive if a profit; enter as negative if a loss.

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Answer #1

The net profit or loss is computed as shown below:

= (Strike price - value of stock at expiration - premium paid) x 3 x 100

= ($ 45 - $ 42.50 - $ 1.75) x 300

= $ 225

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