Answer: $200 loss
Explanation:
When you purchase an option, you assume that the share price will gain a higher amount that the premium paid. In this case, it did not.
For this put option, you paid a premium of $500 ($5 * 100)
This is because there are 100 shares in each put.
The stock rises to $123 and you decide to sell at this price, you will achieve $300 increase on the shares:
(123 - 120) * 100 = 300
The shares had a gain of $300 but you paid $500, leaving you with a loss of $200 on the investment.
