I buy five PUT options on Walmart with a strike price of $97.23.The option premium is 79 cents. Suppose the price of Walmart is $95.50 a share and I choose to exercise the option. What are my total gains or losses?
Please provide the total dollar amount of gains or losses not the amount per share.
Solution - In the Question given - we have a put option
Excersice Price (Strike price ) per put option = $97.23.
Spot rate on Expiry per put option = $95.50
Option Premium per put option = 79 cents
Gross profit per put option = Excersice price - Spot rate as on Expiry
Gross profit per put option = $97.23 - $95.50
Gross profit per put option = $1.73
Total Goss Profit on Five put option is = $1.73 * 5 = $8.65.
Net profit per Put Option = Excersice price - Spot rate as on Expiry - Option Premium
Net Profit per Put Option = $97.23 - $95.50 - 79 cents
Net Profit per Put Option = $0.94
The Total Gain on Five put option is = $0.94 * 5 = $4.70.
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