You purchase one September 50 put contract for a put premium of $2.What is the maximum profit that you could gain from this strategy?
A)$4,800
B)$200
C)$5,000
D)$5,200

Question

Quizplus · Accepted Answer

The maximum profit from a put option is when the stock price falls to zero. The strike price is $50, so the intrinsic value would be $50 per share. Since you paid a $2 premium, the profit per share is $50 - $2 = $48. For one contract (100 shares), the maximum profit is $48 * 100 = $4,800.

You Purchase One September 50 Put Contract for a Put