What’s my profit in this scenario

learningoptiontrading said:
Thank you for everyone’s help and advice! Really appreciate it and happy to see so many replies to my first post in this forum. Can already see the value of this community! :) The book claimed that the net profit in this scenario is $1900, but I calculated many times and got $400 so wanted to make sure I didn’t misunderstand the whole concept. The explanation offered by the book is $2700-$800=$1900, which apparently is only part of the story. For anyone who is curious, I was reading Jeff Tomasulo’s book Tactical Income. I was at an option trading workshop hosted by Interactive Trader last weekend where they insisted that Jeff Tomasulo’s book is correct and that the correct answer is $1900. Glad to hear from you all that I’m not the only one who got $400 as the correct answer.
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  • The credit is $1900.
  • But if the stock closes at $110 on expiry day you are short the 125 puts - which are ITM by $15.00.
  • Buy-to-close the puts for $1500.00.
  • Without taking into account bid/ask spread or commissions. $1900 - $1500 = $400 net profit.
 
learningoptiontrading said:
Thank you for everyone’s help and advice! Really appreciate it and happy to see so many replies to my first post in this forum. Can already see the value of this community! :) The book claimed that the net profit in this scenario is $1900, but I calculated many times and got $400 so wanted to make sure I didn’t misunderstand the whole concept. The explanation offered by the book is $2700-$800=$1900, which apparently is only part of the story. For anyone who is curious, I was reading Jeff Tomasulo’s book Tactical Income. I was at an option trading workshop hosted by Interactive Trader last weekend where they insisted that Jeff Tomasulo’s book is correct and that the correct answer is $1900. Glad to hear from you all that I’m not the only one who got $400 as the correct answer.
More...
Hope you are not signing up for more Interactive Trader workshops, or hand them your money to trade for you.:D
 
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