On the expiration date for a put option with strike price of $10.00,premium $1.50 and the current spot price of $14.00,the holder will:

Question

Quizplus · Accepted Answer

If the current spot price is higher than the strike price on the expiration date, it is not profitable to exercise the put option as the holder can buy the shares at a lower price in the market. In this case, the spot price is $14, which is higher than the strike price of $10. Hence, it is likely that the holder will let the option contract lapse, and not exercise the option or buy the shares in the market. They will lose the premium paid, which in this case is $1.50.

On the Expiration Date for a Put Option with Strike