You sold a put contract on EDF stock at an option price of $.50 and an exercise price of $21.Today,EDF stock is selling for $20 a share and your option position was closed out.Ignoring transaction costs and taxes,what is your total profit?
A)$50
B)$60
C)−$50
D)−$60
E)$0

Question

Quizplus · Accepted Answer

The put option was sold for $0.50 per share, and since options typically cover 100 shares, you received $50. However, since the stock price is now $20, which is below the exercise price of $21, you would have to buy the stock at $21 and sell it at $20, resulting in a $1 loss per share, or $100 total. Thus, your total profit is $50 (premium received) - $100 (loss from exercising) = -$50.

You Sold a Put Contract on EDF Stock at an Option