Question

The stock price of Fisher Company stock has moved widely recently. You decide to purchase a 1-month call option contract with a strike price of $62 and an option price of $2.01. You also purchase a 1-month put option contract on the stock with a strike price of $62 and an option price of $1.48. What will be your total profit or loss on all the transactions related to these option positions if the stock price is $59.40 on the day the options expire?

Answer 1

1. Call Option Strike Price 62 @ premium paid 2.01
2. Put Option Strike Price 62 @ premium paid 1.48

At Maturity Stock Price is $59.40,

1. Call Option will lapse. So loss of Premium = 2.01 Loss
2. Put Option will be exercised. So, Profit** = 62 - 59.40 - 1.48 = 1.12 Profit

** Profit = Strike Price - Closing Price - Premium

Payoff = 1.12 - 2.01 = - 0.89 (Loss)

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