# Between Strike and Break-Even

## OEX Index is between 595 and 584 at expiration

### Buy 1 OEX 595 Put at \$11

With the OEX exercise settlement value exactly at the strike price of \$595 at expiration, the 595 put would be at-the-money and have no value.

With OEX at the break-even point of 584 at expiration, the 595 put would be in-the-money and exercised.

The cash settlement amount received upon exercise would be:

\$595 (put strike price) – 584 (settlement value) = \$11 x \$100 = \$1,100

On the other hand, if the put were sold for its intrinsic value of \$11 (595 put strike price – 584 OEX level) at this point, the premium received would be:

\$11 x \$100 multiplier = \$1,100

This amount of \$1,100 is the total cost of the put.

If the OEX exercise settlement value is between 595 and 584 at expiration, the 595 put will also be in-the-money and would be exercised. The cash settlement amount received, however, would be less than the total cost of the put, resulting in a partial loss for the position.

For example, say the exercise settlement value is 590 at expiration. The cash settlement amount received upon exercise would be:

\$595 (put strike price) – 590 (settlement value) = \$5 x \$100 = \$500

If the put were sold for its intrinsic value of \$5 (595 put strike price – 590 OEX level) at this point, the premium received would be:

\$5 x \$100 multiplier = \$500

OEX did decline in value, but not as much as anticipated. The put that originally cost a total of \$1,100 is now worth \$500, so the investor can recoup some of its initial purchase price and realize a partial loss.

\$1,100 total premium paid for put
\$500 cash settlement amount received at put’s exercise (or sale at intrinsic value)
\$600 partial loss

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