Lock-In profit?

M

minorearth

With YRCW around 1.90, what happens to a position consisting of 100 shares sold short at 1.90, and 1 sold July 2011 put at the $2 strike for a .40 credit, if the stock goes to zero, goes bankrupt, or whatever the worst-case scenario is specifically called. Since the market went in the traders favorable direction, was profit made regardless? Susan
 
Quote from minorearth:

With YRCW around 1.90, what happens to a position consisting of 100 shares sold short at 1.90, and 1 sold July 2011 put at the $2 strike for a .40 credit, if the stock goes to zero, goes bankrupt, or whatever the worst-case scenario is specifically called. Since the market went in the traders favorable direction, was profit made regardless? Susan
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Covered put, not immune to loss.
 
Sell 1 $2 put for 40 cts
Short 100 shares @ $1.90

If YRCW below $2 at exp, assigned and cost basis is $1.60

Max gain of 30 cts below below $2 (-2.00 +.40 + 1.90)
BE at $2.30
Unlimited loss above $2.30
 
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