Options · Question 12 of 12
An investor buys a put with a strike price of 50 euros for 3 euros. At expiry, the share trades at 40 euros. What is her result per option, and where was the break-even point?
1 answer is correct. Hard
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Answer
- B +7 euros, break-even 47 euros
Explanation
At expiry, the put is worth 50 − 40 = 10 euros; minus the 3-euro premium, a profit of 7 euros remains. The break-even point is the strike price minus the premium, i.e. 47 euros. Above 50 euros, the put would expire worthless.