Question

Suppose I sell 3 PUT option contracts on Home Depot with a strike price of $185.00 and an option premium of $2.32. The stock price is $209.45 when I sell the puts, and it and moves between $199.24 and $215.43 during the time up to expiration. What is my profit or loss on this?

Answer 1

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Answer:

Note: Lot size is assumed to be 100. Please divide by 100 if the lot size is 1

Profit on selling put contract => -(MAX(Strike price - Underlying price,0)-Premium)

=> Profit at 199.24 => -3*100*(MAX(185-199.24,0)-2.32) = 696

=> Profit at 215.43 => -3*100*(MAX(185-215.43,0)-2.32) = 696

The profit is $696 for lot size of 100

$6.96 for lot size of 1