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Hi Sir.
I just rewatched the Share Options lecture Part 1.
If I buy a put, that gives me the right to sell. If I chose to exercise it, then do I have to buy the stocks at m.v. before I can sell them? or are they included in the contract and I just have to sell them to profit?
and so what is my profit on exercise? is it the difference between exercise and market price only, or is it the whole of the ‘right to sell price’ (presuming m.v. is below exercise)?
If you choose to exercise a put option, then you do need to have the shares to sell (you may already have the shares but if not then you need to buy them at whatever the MV is).
The profit is the difference between the market price and the exercise price (less, of course, the premium that will already have been paid to buy the option).
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