Five put option contracts are purchased at a price of $4.32 with a strike price of $105. Even the stock price at expiration is $97.29, what is the breakeven stock price for this transaction?
A) $100.68
B) $105.00
C) $101.61
D) $109.32
E) $97.29

Question

Quizplus · Accepted Answer

The breakeven stock price for a put option is calculated by subtracting the premium paid per share from the strike price. Here, for one contract (100 shares), the total premium paid is $4.32 * 100 = $432. Since five contracts were purchased, the total premium paid is $432 * 5 = $2160. The strike price is $105, so the breakeven stock price is $105 - ($2160 / (100 * 5)) = $105 - $4.32 = $100.68.

Five Put Option Contracts Are Purchased at a Price of $4.32