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Homework answers / question archive / The stock price of TSLA is $600
The stock price of TSLA is $600. You purchase one TSLA put option with an exercise price of $550 for a premium of $10. The break-even stock price of the position is
A) $540
B) $560
C) $590
D) There is no breakeven price
Break even price = Exercise price of the stock - Premium paid
= 550 - 10
= 540
If the stock price is 540, the put option would payoff $10 while the option premium would be $10 and hence the option position would break even
Correct choice A