Answer-first summary for fast verification
Answer: 2.00 per share
## Explanation This is a bear put spread strategy with additional positions. Let's calculate the net profit/loss: **Initial cost/net premium:** - Buy ATM put (K=43): -$6 - Sell 2 puts (K=37): +$8 ($4 × 2) - Buy put (K=32): -$1 - **Net premium = -6 + 8 - 1 = +$1** **Payoffs at expiration (stock price = $19):** - Put with K=43: payoff = max(43-19, 0) = $24 - 2 puts with K=37: payoff = 2 × max(37-19, 0) = 2 × 18 = $36 (but since we sold these, this is negative for us) - Put with K=32: payoff = max(32-19, 0) = $13 **Total payoff = 24 - 36 + 13 = $1** **Net profit/loss = Total payoff + Net premium = 1 + 1 = $2 per share** Therefore, the correct answer is **$2.00 per share** (Option D).
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Consider the following bearish option strategy of buying one at-the-money put with a strike price of $43 for $6, selling two puts with a strike price of $37 for $4 each and buying one put with a strike price of $32 for $1. If the stock price plummets to $19 at expiration, calculate the net profit/loss per share of the strategy.
A
-2.00 per share
B
Zero – no profit or loss
C
1.00 per share
D
2.00 per share
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