Question: Suppose that you write a put contract with a strike price of $40 and an expiration date in three months. The current stock price is

Suppose that you write a put contract with a strike price of $40 and an expiration date in three months. The current stock price is $41 and the contract is on 100 shares. What have you committed yourself to? Suppose, for example, that the option is exercised when the price is $30. How much have you gained or lost?

a) Gained $3,000

b) Lost $1,000

c) Lost $3,000

d) Gained $1,000

I know that the strike price $40 *100 = $4,000 loss, but in this situation would we subtract $30 *100 = $3000 from 4,000 to get 1,000 loss?

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