Buying OEX Puts

OEX Index is below break-even point of 584 at expiration
 

If the OEX level, or its exercise settlement value, is below the break-even point of 584 at expiration, the OEX 595 put will be in-the-money and would be exercised.

For instance, say the OEX settles at 580. The cash settlement amount received upon exercise would be:

$595 (put strike price) – 580 (settlement value) = $15 x $100 = $1,500

The net profit for the OEX 595 put in this case would be:

  $1,500   cash settlement amount received at put ’s exercise
- $1,100   total premium initially paid for put
     $400   profit

On the other hand, if the OEX 595 put is sold for its intrinsic value as the market settles at 580 on the option’s last trading day, the premium received would be:

 $595   put strike price
-  580   OEX index level
   $15    intrinsic value received x $100 multiplier = $1,500

The total profit would be the same as after exercise of the put contract:

  $1,500   intrinsic value received at put’s sale
- $1,100   total premium initially paid for put
     $400   profit

This net profit of $400 represents a return on an initial investment of $1,100 total premium paid for the call of approximately 36.4% over the 3-month life of the put contract.