Kimball Johnson has just purchased a put option on Reut Corporation which currently trades at $58 per share.The put option has a strike price of $50,6 months until expiration,and trades at a premium of $3.What is the breakeven price for Johnson's put option.

Question

Quizplus · Accepted Answer

The stock of Reut Corp.needs to fall to $47 at expiration for Johnson to breakeven on his option position.If the stock falls below $47 then Kimball will start to realize a profit from his position.

Kimball Johnson Has Just Purchased a Put Option on Reut