SIE practice questionhardOptions
An investor buys a put option for $2 on a stock with a $40 strike price when the stock trades at $39. At expiration, the stock is at $36. What is the investor's profit or loss per share?
- A$2 loss per share
- B$1 profit per share
- C$2 profit per share✓ Correct answer
- D$1 loss per share
Explanation
Why C — $2 profit per share
Intrinsic value at expiration is $4 ($40-$36). Subtracting the $2 premium, the net profit is $2 per share. The other choices either ignore the premium or miscalculate intrinsic value.
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