Note all Calls and Puts are lots of 100 shares and Price at

Note - all Calls and Puts are lots of 100 shares and Price at expiration is $50.

What is your profit from the following transaction (note per share costs quoted). Profit is how much you made or how much you didn\'t lose.

Short Put

$38

Strike Price

$8

premium received

Solution

It is a case of short put and it means that writing of put option at a strike price takes place.

The profit gained = the premium received due to the writing of a put option.

The profit gained = 8*100

The profit gained = $800