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19 March, 01:36

You sold five put contracts on CTB stock at an option price per share of $1.90. The options have an exercise price of $45 per share. The options were exercised today when the market price was $39 a share. What is your net profit or loss on this investment

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  1. 19 March, 04:47
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    -$2,050

    Explanation:

    Given that,

    Number of options sold = 5

    Option price per share = $1.90

    Exercise price = $45 per share

    Market price = $39 per share

    As the exercise price is greater than the stock market price, so the purchaser of the put option will exercise the option,

    Lot size = 100 shares

    Therefore, the loss on this investment is calculated as follows:

    = - {[ (Exercise price - Market price) * Number of options sold] - (Option price * Number of options sold) } * Lot size

    = - {[ ($45 - $39) * 5] - ($1.90 * 5) } * 100

    = - $2,050
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