Question

A customer buys 1 OEX Jan 530 Put @ $3. The overall market falls and the index closes at 529, while OEX 530 Put contracts close at $4.50. Which is the most profitable action?

A. Close the position
B. Exercise the position
C. Let the position expire
D. Roll-up the position

Answer 1

A) Close the position

Step-by-step explanation:

The customer should close the position. That way he will be able to earn the largest possible profit of $150 (= ($4.50 - $3.00) x 100). By closing the position the customer is ending his investment in that specific security by selling his investment option.