Refer to the Listed Stock Option Price Quote from February and assume it is now January:

If you buy the March put and don't exercise before contract maturity,you will make a profit if the stock price at maturity ________ from today's price.

Question

Refer to the Listed Stock Option Price Quote from February and assume it is now January:

If you buy the March put and don't exercise before contract maturity,you will make a profit if the stock price at maturity ________ from today's price.

Quizplus · Accepted Answer

According to the option quote, the March put has a strike price of 57.50 and a premium of 3.30. To breakeven on this trade, the stock price would need to decrease by the premium paid, plus the strike price, or $60.80.

To make a profit on the trade, the stock price would need to decrease below the breakeven point. The current stock price listed in the quote is 59.89. To calculate the percentage decrease required to make a profit:

(60.80-59.89)/59.89  x 100 = 1.51%

Therefore, the stock price would need to decrease by more than 1.51%, which is only possible with answer choice C (a decrease of more than 3.94%).