Apparently, 55,000 contracts at 30 were bought at 0.15 cents per share in the middle of the week. On Friday, March 14, 2008, Bear Sterns (BSC) dropped 26 dollars and the put price at 30 increased to around five dollars per share. The initial $825,000 investment grew to $27.5 million overnight.
Initial Investment = 825000
Intrinsic Value = -25
Premium ,% = 25.15,-100.6%
Final Option Price = 5
Final Investment Value = 27500000
Total Profit = 26675000
From Options Profit Analyzer
Initial Investment = 825000
Intrinsic Value = -25
Premium ,% = 25.15,-100.6%
Final Option Price = 5
Final Investment Value = 27500000
Total Profit = 26675000
From Options Profit Analyzer
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1 comment:
Though you are correct on the initial investment calculation you have clearly miscalculated the profit from this transaction. If the puts were worth $25 a share and 55,000 were purchased, being that there are 100 shares per contract, this would yield $137,500,000. Not a bad way to earn $166.66 for every $1 invested in a under week.
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