Explore BrainMass

Explore BrainMass

    Profit (Loss) on Put Options

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    An investor owns 1000 shares of SoftKiss Lipstick Company. The stock currently sells for $65 per share. The investor is very concerned that the price may be too high so she buys 7 put option contracts to offset some of the risk of the stock price falling. The contracts have a 6-month option period with an exercise price of $65. The investor pays $4.80 per share for the options. At the end of three months, SoftKiss stock is selling for $47 per share. The investor can sell the option for $17.50 per share. If she does indeed sell all 7 of the put option contracts, how much will she make (or lose) on the option?

    © BrainMass Inc. brainmass.com October 1, 2020, 9:32 pm ad1c9bdddf
    https://brainmass.com/business/derivatives/profit-loss-on-put-options-182224

    Solution Preview

    Please see the attached file.

    An investor owns 1000 shares of SoftKiss Lipstick Company. The stock currently sells for $65 per share. The investor is very concerned that the price may be too high so she buys 7 put option contracts to offset some of the risk ...

    Solution Summary

    The Profit (Loss) on Put Options is calculatd.

    $2.19

    ADVERTISEMENT