Question

You have written a put option on Diebold Inc. common stock. The option has an exercise price of $42 and Diebold's stock currently trades at $44.50. The option premium is $.75 per contract. a. What is your net profit if Diebold's stock price increases to $46 and stays there until the option expires? b. What is your net profit on the option if Diebold's stock price decreases to $39 at expiration of the option and the option holder exercises the option? (For all requirements, negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. (e.g., 32.16)) Net profit Net profit per share per share b.

Answer 1

sol: put option et Exercise Price = $42 Premium = $ 0,75 per contract @ Net Psofit lbloss) = [Exiscise kice l-Ispot fiice (-) option Premium e [42-46] 10.75 Net Loss = (4.75) 16 Net Profit = [42-39] +0.75 = $2.25