Question

A customer buys 100 shares of ABC at $65 and buys 1 ABC Jan 65 Put @ $3. At which market price is the position profitable?

Answer 1

The correct answer is $68.

Step-by-step explanation:

First, both the $ 3 paid in premiums $ 64 paid for the shares must be recovered by the buyer ($ 3 + $ 64 = $ 67). In the process of selling the shares, a profit margin must be obtained, that is, the shares must be sold at a value greater than $ 67. Therefore, the minimum price that meets this condition is $ 68.