SIE (Securities Industry Essentials) Practice Exam

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A customer breaks even on a combined stock and put option position at what share price at expiration?

$32 per share
$35 per share
$38 per share
$40 per share

The correct answer is: $38 per share

Option A is incorrect because it is below the break-even point and the customer would not make any profit. Option B is incorrect because it is also below the break-even point and the customer would not make any profit. Option D is incorrect because it is above the break-even point and the customer would make a profit. At expiration, the combined stock and put option position will break even when the share price is equal to the strike price of the put option minus the premium paid for the put option. In this scenario, that would be $38 per share ($40 strike price - $2 premium paid).