Question

A speculator buys a put option with a strike of $40 for $2.75. The stock is currently priced at $43.86 and moves to $42.57 on the expiration date. The speculator will exercise the option on the expiration date (if it is feasible to do so). What is the speculator's profit or loss per share? (Do not ignore the premium paid.)

Answer 1

As Stock Price at Expiration($42.57) is above the Strike Price of Put Option($40), the speculator will not exercise the option,

So,

Loss = Premium Paid

Loss = -$2.75

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