You sold five put contracts on CTB stock at an option price per share of $1.90. The options have an exercise price of $45 per share. The options were exercised today when the market price was $39 a share. What is your net profit or loss on this investment

-$2,050

Explanation:

Given that,

Number of options sold = 5

Option price per share = $1.90

Exercise price = $45 per share

Market price = $39 per share

As the exercise price is greater than the stock market price, so the purchaser of the put option will exercise the option,

Lot size = 100 shares

Therefore, the loss on this investment is calculated as follows:

= - {[ (Exercise price - Market price) * Number of options sold] - (Option price * Number of options sold) } * Lot size

= - {[ ($45 - $39) * 5] - ($1.90 * 5) } * 100

= - $2,050