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A stock is trading at $50. You believe there is a 60% chance the price of the stock will increase by 10% over the next three months. You believe there is a 30% chance the stock will drop by 5% and you think there is only a 10% chance of a major drop in price of 20%. At the money 3 month puts are available at a cost of $650 per contract.

What is the expected dollar profit for a writer of a naked put at the end of three months?

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Answer:

$475

Step-by-step explanation:

User Kfir Erez
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