# Refer to Problem 14.9. What would the loss of the seller of the put option be if,

## Question:

Refer to Problem 14.9. What would the loss of the seller of the put option be if, at expiration, XLB is trading at $$20?$$ What would the profit of the seller be if, at expiration, XLB is trading at $$25$$?

Data from Problem 14.9

You believe that oil prices will be rising more than expected and that rising prices will result in lower earnings for industrial companies that use a lot of petroleum-related products in their operations. You also believe that the effects on this sector will be magnified because consumer demand will fall as oil prices rise. You locate an exchange-traded fund, XLB, that represents a basket of industrial companies. You don’t want to short the ETF because you don’t have enough margin in your account. XLB is currently trading at $$23.$$ You decide to buy a put option (for 100 shares) with a strike price of $$24,$$ priced at $$1.20.$$ It turns out that you are correct. At expiration, XLB is trading at $$20.$$ Calculate your profit.

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