Ask Question
17 July, 21:04

The price of a stock on February 1 is $124. A trader sells 200 put options on the stock with a strike price of $120 when the option price is $5. The options are exercised when the stock price is $110. The trader's net profit or loss is A. Gain of $1,000 B. Loss of $2,000 C. Loss of $2,800 D. Loss of $1,000

+1
Answers (1)
  1. 17 July, 23:05
    0
    D. Loss of $1000

    Explanation:

    Given that

    A trader sells 200 put options at strike price of $120

    And options are exercised when stock price is $110

    Thus, payoff that must be made on option

    = 200 * (120 - 110)

    = 200 * 10

    = $2000.

    Also,

    Amount received for the option

    = price of option * quantity

    = 5 * 200

    = $1000

    Therefore,

    Trader's net loss = 2000 - 1000

    = $1000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “The price of a stock on February 1 is $124. A trader sells 200 put options on the stock with a strike price of $120 when the option price ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers