Question

What is the profit/loss for stock from the following information?

Stock price jan- 102.03

Stock pric april- 86.19

option price jan- (-5.46)

option price april- 1.93

*Buying 100 shares

Answer 1

The value of option has gone up as the share prices has gone down this is clearly an example of put option because depreciation in stock price has led to appreciation in options price.

It is assumed that the investor had bought hundred shares and also bought a put option .

So, Loss from shares= 100×[102.03-86.19]

= 100×15.84

=(1584)

Gain from put option= 100×[1.93-(-5.46)]

= 100×7.39= 739

So Net loss from both transaction= (1584-739)

=$ 845

Answer would be $ 845