An investor buys a put with a strike price of $70 at $3 per share. At expiration, the underlying stock is selling for $72. What is the profit or loss to the writer per share?

Question

An investor buys a put with a strike price of $70 at $3 per share.  At expiration, the underlying stock is selling for $72.  What is the profit or loss  to the writer per share?

Quizplus · Accepted Answer

The writer of the put option profits when the option expires worthless, which happens because the stock price at expiration ($72) is above the strike price ($70). The writer keeps the premium of $3 per share as profit.

An Investor Buys a Put with a Strike Price of $70