You sold ten put option contracts on PLT stock with an exercise price of $32.50 and an option price of $1.10.Today,the option expires when the underlying stock is selling for $34.30 a share.Ignoring trading costs and taxes,what is your total profit on this investment?
A)$2,900
B)− $1,100
C)$700
D)$1,100
E)− $2,900

Question

Quizplus · Accepted Answer

You sold 10 put option contracts, each for 100 shares, so you have an obligation to buy 1,000 shares at $32.50 each.

If the stock is selling for $34.30 a share, you can let the options expire, and you’ll earn the option price of $1.10 per share, or $110 per contract. Since you sold 10 contracts, your total profit is:

$110 × 10 = $1,100

Therefore, the correct answer is D.

You Sold Ten Put Option Contracts on PLT Stock with an Exercise