Puts ITM

What this put option profit-and-loss question tests

This is a straightforward easy question on option mechanics and intrinsic value. It appears regularly in interviews at trading firms because it verifies that a candidate understands the basic economics of put options, including how they generate profit when the underlying price moves below the strike.

To solve problems like this, you need to know how to calculate intrinsic value at expiration, account for the premium paid upfront, and arrive at net profit or loss. The question rewards clarity on the cash flows involved—both what the option holder receives and what they paid to enter the position.

• Intrinsic value of puts at expiration
• Impact of premium on breakeven and profit
• In-the-money vs. out-of-the-money mechanics