Calculate the value of a short put if the exercise price is $10.00,the premium is $1.50 and the spot price is $8.00,given V = P - max(X-S,0).

Question

Quizplus · Accepted Answer

Using the formula V = P - max(X-S,0), we can calculate the value of the short put as follows:

V = $1.50 - max($10.00 - $8.00, 0)
V = $1.50 - max($2.00, 0)
V = $1.50 - $2.00
V = -$0.50

Therefore, the value of the short put is -$0.50, which means that the best choice is B.

Calculate the Value of a Short Put If the Exercise