Series 7 practice questionmediumOptions — Put Options Calculation
An investor buys 1 MNO Oct 35 put at $2. At expiration, MNO is trading at $29. What is the investor's profit?
- A$200
- B$400✓ Correct answer
- C$600
- D$800
Explanation
Why B — $400
The put buyer can sell at $35 (strike) when the stock is at $29, for a $6 gain per share. Subtract the $2 premium: $6 - $2 = $4 per share. Multiply by 100 shares: $4 x 100 = $400 profit. The breakeven was $33 ($35 - $2).
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