You have purchased one SXO put option with a strike price of 1,350. You have also written one SXO put option with the same maturity date at a strike price of 1,300. At maturity, what is your total payoff if the S&P Canada 60 index is 1,290?
A) $3,000
B) $0
C) $6,000
D) -$6,000
E) $5,000

Question

Quizplus · Accepted Answer

The purchased put option with a strike price of 1,350 would be exercised, resulting in a payoff of 1,350 - 1,290 = $60 per index option contract. Therefore, the total payoff on this option is ($60 x 100) = $6,000.
The written put option with a strike price of 1,300 would also be exercised since the index is below the strike price, resulting in a payoff of 1,300 - 1,290 = $10 per index option contract. Therefore, the total payoff on this option is ($10 x 100) = $1,000.
The total payoff would be the sum of the payoffs from the purchased put option and the written put option, resulting in a total payoff of ($6,000 - $1,000) = $5,000.

You Have Purchased One SXO Put Option with a Strike