You sold a put contract on EDF stock at an option price of $.40. The option had an exercise price of $20. The option was exercised. Today,EDF stock is selling for $19 a share. What is your total profit or loss on all of your transactions related to EDF stock assuming that you close out your positions in this stock today? Ignore transaction costs and taxes.
A) -$140
B) -$60
C) $40
D) $60
E) $140

Question

Quizplus · Accepted Answer

You received $40 from selling the put option. When the option was exercised, you had to buy the stock at $20, which is $1 more than the current market price of $19, resulting in a $100 loss. Thus, your total loss is $100 - $40 = -$60.

You Sold a Put Contract on EDF Stock at an Option