The stock price of TSLA is $600

Finance Dec 24, 2020

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

Expert Solution

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

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