Below Break-Even

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


Buy 1 OEX 595 Put at $11


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.


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