SPX Index is below break-even point of 1365 at expiration
Buy 1 SPX 1390 Put at $25
If the SPX level, or its exercise settlement value, is below the break-even point of 1365 at expiration, the SPX 1390 put will be in-the-money and would be exercised.
For instance, say the SPX settles at 1355. The cash settlement amount received upon exercise would be:
$1390 (put strike price) – 1355 (settlement value) = $35 x $100 = $3,500
The net profit for the SPX 1390 put in this case would be:
$3,500 cash settlement amount received at put ’s exercise
- $2,500 total premium initially paid for put
This net profit of $1,000 represents a return on an initial investment of $2,500 total premium paid for the put of approximately 40% over the 3-month life of the put contract.