You own 100 shares of a stock with a current price of $50 and you also own a put option of 100 shares of the stock with a strike price of $45.What is the minimum value of your portfolio at expiration? Ignore the original cost of the put option for your calculation.

Question

Quizplus · Accepted Answer

At expiration, if the stock price falls below the strike price of $45, you can exercise the put option and sell the 100 shares of stock at $45 each, resulting in a minimum value of $4,500. If the stock price stays above $45, the put option will expire worthless but you still own the 100 shares of stock, which would have a minimum value of $5,000. Therefore, the minimum value of your portfolio at expiration is $4,500.

You Own 100 Shares of a Stock with a Current