You purchased 6 put option contracts on Mountain Builders stock at an option premium of $0.75. The strike price is $25. What is your break-even stock price?
A) $19.90
B) $24.25
C) $25.00
D) $25.75
E) $30.10

Question

Quizplus · Accepted Answer

The break-even stock price can be calculated as follows:

Break-even price = Strike price - Option premium
Break-even price = $25 - ($0.75 x 100) [since there are 100 shares per option contract]
Break-even price = $25 - $75
Break-even price = $24.25

Therefore, the break-even stock price is $24.25, which corresponds to choice B.

You Purchased 6 Put Option Contracts on Mountain Builders Stock