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Jamie Wrote a Nine-Month Put on Beta Stock

question 109

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Jamie wrote a nine-month put on Beta stock.The strike price was $25 and the market price at the time the option was written was $24.The total price of the option contract was $150.At what market price will Jamie just break-even on this investment? Ignore transaction costs and taxes.


Definitions:

Expected Price Level

The anticipated average level of prices for all goods and services in an economy for a future period, influenced by current and forecasted economic conditions.

Real Wage

The buying capacity of salaries once corrected for inflation, showing the amount of products and services that can be purchased.

Nominal Wage

The wage or salary paid to labor in current dollars, unadjusted for inflation, representing the face value of earned income.

Price Level

Refers to the average of all current prices for goods and services in an economy.

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