Question

Suppose you believe that Du Pont's stock price is going to decline from its current level of $ 83.97 sometime during the next 5 months. For $ 279.07 you could buy a 5-month put option giving you the right to sell 100 shares at a price of $ 76 per share. If you bought a 100-share contract for $ 279.07 and Du Pont's stock price actually changed to $ 85.05 at the end of five months, your net profit (or loss) after behaving rationally on the decision to exercise the option would be ______

Answer 1

Answer:

Net loss $1,184.07

Explanation:

Calculation for the Net profit/loss

Using this formula

Net profit/Loss =Share contract amount-[Numbers of shares*(Price per shares-Changed in stock price)]

Let plug in the formula

Net profit/loss=$279.07-[100*($76-$85.05)]

Net profit/loss=$279.07-(100*$-9.05)

Net loss=-$279.07- $905)

Net loss=-$1,184.07

Therefore the net profit (or loss) after behaving rationally on the decision to exercise the option would be $1,184.07