You sell (short position) 5 European put option contracts on ABC stock at the premium of $5.25. The exercise price of the option is $60, the maturity of the options is 1-month, and stock is currently trading at $58.
What is the payoff of your position if the stock is at $57.50 at maturity? Show the results numerically.
Repeat i. for the stock price at maturity of $64.
Problem-02b: For problem-02a:
What is the profit (P/L) of your position if the stock is at $57.50 and at $64? Show the results numerically.
What is the Break Even Point (BEP) of your investment? (It is easier to find the BEP on one option, rather than for the entire value of the investment)