You purchase one ibm july 120 put contract for a premium of $5 (per share). you hold the option until the expiration date when ibm stock sells for $123 per share. you will realize a on the investment. (hint: recall that each put covers 100 shares.)a. $200 profitb. $200 lossc. $300 profitd. $300 losse. $500 loss

$200 loss

Explanation:

When you purchase an option, you assume that the share price will gain a higher amount that the premium paid. In this case, it did not.

For this put option, you paid a premium of $500 ($5 * 100)

This is because there are 100 shares in each put.

The stock rises to $123 and you decide to sell at this price, you will achieve $300 increase on the shares:

(123 - 120) * 100 = 300

The shares had a gain of $300 but you paid $500, leaving you with a loss of $200 on the investment.

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