Question:
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?