Marek invested in a put option. A put option gives the owner the right to sell the underlying asset. Here the strike price of the put option for the underlying asset at the time of purchase was 16 and the asset (stock) price was 22. At the end of period, the stock price increased to 25, which is greater than the strike price and if Marek wants to exercise the option, he would receive only the strike price, which is $16x22 shares= 352 instead of the current price $25x22 shares= 550. So Marek would let the option expire and lose the money invested in the option.
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Sunil Divakaran
Accountant
DUBAI
United Arab Emirates
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Original Message:
Sent: 11-22-2019 03:02 AM
From: Syed Yousuf Jamal
Subject: Derivatives-can someone pls explain the answer
Pitchgent Inc. stock was trading last month at $22 per share. There were two types of options available on the stock. Call options with a strike price of $16, which expire at the end of the month, were trading at $6.00. Put options with a strike price of $16, which expire at the end of the month, were trading at $1.10. Larry invested $132 in common stock. Keaty invested $132 in the call options. Marek invested $132 in the put options. At the end of one month, the price of Pitchgent Inc. is $25. How much money did Marek make from the investment? | $0 |
| Marek lost the investment amount of $132 |
| $948 |
| $3,000 |
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Syed Yousuf Jamal
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