Jaime wrote a nine-month put on Beta stock.The strike price was $25 and the market price at the time the option was written was $24.The total price of the option was $150.At what market price will Jamie just break-even on this investment? Ignore transaction costs and taxes.
A) $23.50
B) $24.00
C) $25.00
D) $26.50

Question

Quizplus · Accepted Answer

The break-even point is the market price at which the option is worth exactly what Jaime paid for it. The total price of the option is $150, so the break-even point is the market price at which the option is worth $150. The option is worth $150 when the market price is $23.50.

Jaime Wrote a Nine-Month Put on Beta Stock