If you buy the March put and don't exercise before contract maturity, you will make a profit if the stock price at maturity _______________________ from today's price.

Question

Quizplus · Accepted Answer

Buying a put gives the holder the right to sell the underlying asset at the strike price. If the price of the stock decreases, the holder can sell the stock at the higher strike price, making a profit. Therefore, the holder profits if the stock price decreases by more than the premium paid for the put option. Given the strike price and premium at the market price, the stock price needs to decrease by more than 3.94% for the put option to be profitable at maturity.

If You Buy the March Put and Don't Exercise Before