The price of a stock is $67.A trader sells 5 put option contracts on the stock with a strike price of $70 when the option price is $4.The options are exercised when the stock price is $69.What is the trader's net profit or loss?
A) Loss of $1,500
B) Loss of $500
C) Gain of $1,500
D) Loss of $1,000

Question

Quizplus · Accepted Answer

The option payoff is 70−69 = $1.The amount received for the option is $4.The gain is $3 per option.In total 5×100 = 500 options are sold.The total gain is therefore $3 × 500 = $1,500.

The Price of a Stock Is $67