Question

You purchase one IBM March 120 put contract for a put premium of $10. The maximum profit that you could gain from this strategy is _________.

A. $120
B. $1,000
C. $11,000
D. $12,000

Answer 1

$11,000

Step-by-step explanation:

One IBM March 20 put contract is purchased at a premium of $10

Therefore the maximum profit that will be gained from this strategy can be calculated as follows

= 100(120-10)

= 100(110)

= 11,000

Hence the maximum profit is $11,000