Question

You write one IBM July 100 put contract for a premium of $8. You hold the option until the expiration date when IBM stock is at $109 per share. How much profit or loss you will realize on the investment? Remember each contract has 100 shares.

Answer 1

You will realise a profit of $8 per contract which is the premium amount. This is because the put option will not be exercised by the holder of option because it is out of money. There is no point of exercising the put option to sell the shares at $100 if the same can already be sold at a price of 109 in the spot market.

I hope this makes sense and helps you

Feel free to ask anything in the comments section

Also press the like button

Took real efforts

Thanks & Regards