Find the maximum gain for the buyer of a put option

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Reference no: EM132051252

Question: The price of BBB stock is $80. A speculator believes that the price of BBB stock will drop by at least 25% in the next month. In order to take advantage of this situation, he purchased out of the money 1-month put options with a strike of $75 at a put premium of $1. What is the P&L of the particular put option? What is the breakeven point? What is the maximum gain for the buyer of a put option? What is his maximum loss? If his expectation materializes, what is his return?

Reference no: EM132051252

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