Les sold a one-month European $25 call and a one-month European $25 put on ABC stock. The call price per share is $.70 and the put price per share is $1.80. What will be the net profit on these option positions if the stock price is $23 on the day the options expire? Ignore trading costs and taxes.

Question

Quizplus · Accepted Answer

Les received $0.70 for the call and $1.80 for the put, totaling $2.50 per share. If the stock price is $23 at expiration, the call expires worthless, but the put is exercised, costing Les $2 per share ($25 - $23). The net profit is $2.50 received - $2 paid = $0.50 per share. For 100 shares, the profit is $50.

Les Sold a One-Month European $25 Call and a One-Month