Thank you for visiting A put option on an IBM stock has a strike price of 125 The holder of this put option exercises the option today when the. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Answer:
sells an IBM share today at the price of $122
Explanation:
An individual that is the owner of the put options is basically the owner of the individual stock shares of the company. When they place a strike price that is the price that they are planning on selling their shares (such as a sell order) but when they exercise the option that is when they actually sell and doing so would sell their shares at the current price at that moment. Therefore, in this scenario, the holder of the put option sells an IBM share today at the price of $122.
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Final answer:
In this situation, the holder of the IBM put option sells an IBM share today at the price of $125, making a profit from the difference between the strike price and the current market price.
Explanation:
The holder of the put option sells an IBM share today at the price of $125. A put option provides the holder the right, but not the obligation, to sell a certain number of shares at a predetermined price (the strike price) before the option's expiration date. At a strike price of $125, if the current market price for IBM is lower ($122 in this case), the holder can still sell at the higher price of $125 by exercising the option. Thus, the holder makes a profit from the difference between the strike price and the current market price.
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