Three months ago, Jen Baker purchased one American put option contract on Mechor Corporation for $4 per option share. Baker also owns 100 shares of Mechor. The following data applies to Baker’s position:
Option strike price $60
Stock price on the date of option purchase $60
Stock price today $52
Time to option expiry from today 1 month.
Given only the above data, if Baker exercises her option today, the profit/loss (from the date of the option purchase) on Baker’s combined stock/put position is:
Baker’s net cost of the position is 60 + 4 = $64 per share. At exercise she receives $60 per share. Her net loss on the position is -4(100) = -$400.