Difference in expected loss from protective put strategies

CFA Level II
#21

The correct answer choice is “A”. The Dec 38 expected loss should be 854,000. If we are long a 38 put option and our expected stock price is $38.80 then we expect the put to expire worthless. Our loss would thus be [(41.28 − 38.80) + 3.62] * 140,000 = 854,000. Thus the Dec 38 loss is smaller by: 907,200 – 854,000 = $53,200. This makes the correct answer A.

I was right :slight_smile: . This is from Schweser errata. They said that they make a mistake

#22

Fidelity Investments Option Strategy Guide

https://www.fidelity.com/learning-center/investment-products/options/options-strategy-guide/overview

#23

Spent an hour trying to understand where I went wrong and following the gibberish above. Good to know that OP was right all along and that Schweser made an error. Thanks.