Suppose you own a put option on a share with a strike price of $35 that expires today. The price of the underlying share is $25. If you purchase the share and exercise the put option:

Question

Quizplus · Accepted Answer

If you purchase the share at $25 and exercise the put option with a strike price of $35, you have the right to sell the share at $35. Since the market price of the share is only $25, you would make a profit of $10 by selling it at the higher price. Therefore, you will earn $10.

Suppose You Own a Put Option on a Share with a Strike