Final answer:
After exercising the put option in a long strangle strategy with the share price at $47, relative to the initial share price at $50 and considering the cost of both put and call options, the total loss is $440.
Step-by-step explanation:
To calculate the profit or loss from implementing a long strangle strategy, we need to consider the price change in the stock, the cost of the options, and the action taken at expiry of the options. You longed a put option with a strike price of $45 at $0.65 and longed a call option with a strike price of $55 at $0.75. Since each contract is for 100 shares, the total cost for the put option is $65 (100 * $0.65) and for the call option is $75 (100 * $0.75), totaling $140.
As the current share price is $47, you would exercise the put option to sell shares at the strike price of $45, which results in a loss of $2 per share (since you'd be selling at $45 but the market value is $47). However, because we are considering the loss relative to the initial share price when the options were bought ($50), the loss is actually $3 per share. For 100 shares, this converts to a loss of $300. After including the cost of the options ($140), the total loss comes to $440.
However, since you don't exercise the call option (as the share price is below the strike price), there's no additional cost or profit from the call side of the strategy.
Therefore, the total loss from the long strangle strategy is the loss on the put option (including the decrease in stock value) plus the cost of the call option, which is $440.