Calculate the value of a short put if the exercise price is $61.0, the premium is $96.8 and the spot price is $177.2.Question 3Answera.-19.40b.-116.20c.213.00d.96.80e.157.80
Question
Calculate the value of a short put if the exercise price is 96.8 and the spot price is $177.2.Question 3Answera.-19.40b.-116.20c.213.00d.96.80e.157.80
Solution
The value of a short put option can be calculated using the formula:
Value of Short Put = Premium - Max(0, Exercise Price - Spot Price)
Given in the question: Exercise Price = 96.8 Spot Price = $177.2
Substituting these values into the formula:
Value of Short Put = 61.0 - $177.2)
Since the Spot Price is greater than the Exercise Price, the value inside the Max function will be negative. Therefore, Max(0, 177.2) will be 0.
So, the Value of Short Put = 96.8
Therefore, the correct answer is d.96.80.
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