Question

An investor buys 100 shares of abc at 50 in may. he also buys an august 80 put for 3 on an index with a multiplier of 100. in august, the abc shares decline to 45 and the index declines to 70. if the investor closes out his stock position and exercises his put, what is his profit or loss?

Answer 1

Answer:

$400 loss.

The opening purchase of the Apr 40 call was made at 6 and the closing sale of that call was made at 4; the difference of 2 represents a $200 loss. The. opening. purchase .of .the .Apr. 50 .put .was .made. at. 8 and the closing sale of that put was made 6;. the .difference .of .2 .represents. a. $200 loss. The total loss for the account was $400. The position is a long combination.

Reference: 4.16.2 in the License Exam Manual.

Answer 2

Answer.

Rs 400 loss

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