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Tasya [4]
3 years ago
14

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 sh

are. The options were exercised today when the market price was $39 a share. What is your net profit or loss on this investment
Business
1 answer:
IRINA_888 [86]3 years ago
6 0

Answer:

-$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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