Jamie wrote a nine-month put on Beta stock. The strike price was $25 and the market price of Beta stock at the time the option was written was $24. The total price of the option contract was $150. At what market price will Jamie just break-even on this investment? Ignore transaction costs and taxes.
A) $23.50
B) $24.00
C) $25.00
D) $26.50

Question

Quizplus · Accepted Answer

The break-even point for a put option is the strike price minus the premium paid. Here, the strike price is $25, and the premium is $150 for 100 shares, which is $1.50 per share. So, $25 - $1.50 = $23.50.

Jamie Wrote a Nine-Month Put on Beta Stock