The market price of ABC has been very volatile and you think this volatility will continue for a few weeks.Thus,you decide to purchase a one-month call option contract on ABC share with a strike price of €25 and an option price of €1.30.You also purchase a one-month put option on ABC with a strike price of €25 and an option price of €.50.What will be your total profit or loss on these option positions if the share price is €24.60 on the day the options expire?

Question

Quizplus · Accepted Answer

The call option will not be exercised because the market price is below the strike price, resulting in a loss of €1.30 (the cost of the option). 
The put option will be exercised, resulting in a profit of €0.50 (the difference between the strike price and the market price).

Therefore, the total profit or loss will be:
-€1.30 (call option loss) + €0.50 (put option profit) = -€0.80

This means a loss of €0.80, which is closest to answer choice B (-€140).

The Market Price of ABC Has Been Very Volatile and You