Suppose you have a put option that allows you to sell 100 shares of Alcan for $54.50 per share any time before October 2014. If the stock price falls to $45.00 per share, your profit is
A) $9.50.
B) $54.50.
C) $950.00.
D) $45.00.
E) $0.00.

Question

Quizplus · Accepted Answer

If the stock price falls to $45.00 per share, you can exercise the put option and sell the 100 shares at $54.50 per share, which is a profit of $9.50 per share. Thus, the total profit would be $9.50 x 100 shares = $950.00.

Suppose You Have a Put Option That Allows You to Sell