Question

You purchased 600 shares of SLG, Inc. stock at a price of $41.20 a share. You then purchased put options on your shares with a strike price of $45.00 and an option premium of $1.10. At expiration, the stock was selling for $48.30 a share. You sold your shares on the option expiration date. What is your net profit or loss your transactions related to SLG, Inc. stock?

Answer 1

Profit of 3600

Step-by-step explanation:

I bought the 600 shares at a price of $41.20

so, Cost of buying the shares 24720

Along with it, i also bought the put option in $1.10 with a strike price of $45.

Buying the put option able me to sell the stock in 45 regardless of the price in stock market is.

But at the expiration date, the price of stock is $48.30 (more than strike price of $45)

So, i would not sell my stock to the broker in 45 (strike price) where, i can sell this stock in stock market at $48.30

Selling this stock in 48.30

48.30*600=28980

I must pay the option premium even though i have not utilized the option.

1.10*600=660

Finally,

selling price of shares-cost of buying shares - cost of purchasing premium

28980-24720-660= 3600