Jimmy Casteel pays a premium of $1.60 to buy a put option with a strike price of $145. If the stock price at expiration is $128, Casteel’s profit or loss from the options position is: A. $18.40. B. $1.60. C. $15.40.
The put option will be exercised and has a value of $145-$128 = $17 [MAX (0, X-S)]. Therefore, Casteel receives $17 minus the $1.60 paid to buy the option. Therefore, the profit is $15.40 ($17 less $1.60).
