Question

"The premium on a pound put option is $.04 per unit. The exercise price is $1.60. The break-even point is ____ for the buyer of the put, and ____ for the seller of the put. (Assume zero transaction costs and that the buyer and seller of the put option are speculators." g

Answer 1

$1.56, $1.56

Step-by-step explanation:

Break-even point on a Put option is the Net of premium cost. Your exercise price is $1.60, it includes the premium price paid to the seller. The break-even point for the will be $1.56 ( $1.60 - $0.04 ) and for the seller it will also be $1.56 because there is no transaction cost is involved and the premium received is an income for him.