You sold ten put option contracts on PLT stock with an exercise price of $31.20 and an option price of $1.20. Today,the option expires and the underlying stock is selling for $33 a share. Ignoring trading costs and taxes,what is your total profit or loss on this investment?
A) -$3,300
B) -$1,200
C) $120
D) $1,200
E) $3,300

Question

Quizplus · Accepted Answer

Since the stock price at expiration ($33) is above the exercise price ($31.20), the put options expire worthless. You keep the premium received from selling the options, which is $1.20 per share. For 10 contracts (1,000 shares), the total premium is $1,200, which is your profit.

You Sold Ten Put Option Contracts on PLT Stock with an Exercise