Question

You purchase one IBM July 120 put contract for a premium of $3. You hold the option until the expiration date when IBM stock sells for $123 per share. You will realize a ______ on the investment. $300 profit $300 loss $500 loss $200 profit

Answer 1

Loss on putting for long time = $300 (Loss )

Explanation:

Given:

Strike price = $120

Stock price = $123

Premium amount = $3 per share

Realize on investment = ?

Computation of realizing on investment:

Given that strike price is lower than the stock price, So premium paid considers as a loss.

Loss on putting for long time = $3 × 100

Loss on putting for long time = $300 (Loss )