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Today’s share price of Apple is $120

Finance

Today’s share price of Apple is $120. You think Apple’s stock will fall over the next 3 months.

Today you observe the following option prices (all expiring in 3 months):

Option 1: Put Option Premium = $4; with a Strike Price = $110

Option 2: Put Option Premium = $2; with a Strike Price = $100

Today you buy Option 1 and sell Option 2; (i.e. bear put spread). At expiration the stock price equals $106. What is your profit or loss (on a per share basis)?
A) A loss of $4
B) A loss of $2

C) A profit of $2 D) A profit of $4 E) A profit of $6

Option 1

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