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

Question

Quizplus · Accepted Answer

The put option allows you to sell the stock at the strike price of $35. Since the stock is currently priced at $25, exercising the option lets you sell it for $10 more than the market price, resulting in a $10 profit.

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