**Example:**

**Current stock price**: $50

**Put option bought**: 1 contract (100 shares) with a strike price of $45

**Premium paid**: $1 per share

**Scenario 1: Stock price at expiration is $40**

To calculate the profit or loss from buying a put option under the given conditions, we need to consider both the intrinsic value of the option at expiration and the premium paid. Let's break down the details step-by-step:

### Given Data
- **Current stock price**: $50
- **Strike price**: $45
- **Premium paid**: $1 per share
- **Number of shares**: 100 (since one contract represents 100 shares)

### Scenario 1: Stock price at expiration is $40

1. **Determine the intrinsic value of the put option at expiration:**
   - The intrinsic value of a put option at expiration is given by:
     \[
     \text{Intrinsic Value} = \max(K - S_T, 0)
     \]
   - Plugging in the given values:
     \[
     \text{Intrinsic Value} = \max(45 - 40, 0) = 5
     \]

2. **Calculate the total premium paid:**
   - The total premium paid is the premium per option multiplied by the number of shares:
     \[
     \text{Total Premium} = P \times n = 1 \times 100 = 100
     \]

3. **Calculate the total intrinsic value at expiration:**
   - The total intrinsic value is the intrinsic value per share multiplied by the number of shares:
     \[
     \text{Total Intrinsic Value} = \text{Intrinsic Value} \times n = 5 \times 100 = 500
     \]

4. **Calculate the profit or loss:**
   - The profit or loss is determined by subtracting the total premium paid from the total intrinsic value at expiration:
     \[
     \text{Profit/Loss} = \text{Total Intrinsic Value} - \text{Total Premium}
     \]
   - Plugging in the values:
     \[
     \text{Profit/Loss} = 500 - 100 = 400
     \]

### Conclusion
- The buyer of the put option will have a profit of $400.

Would you like further details or have any questions?

Here are 8 related questions to expand on this information:

1. How does the strike price affect the profit or loss of a put option?
2. What happens to the profit/loss if the stock price at expiration is above the strike price?
3. How would the profit/loss change if the number of contracts was different?
4. Can you explain the concept of extrinsic value in options trading?
5. How would the profit/loss be affected if the premium paid was higher?
6. What is the significance of the expiration date in an options contract?
7. How is the break-even point for the buyer of a put option calculated?
8. What are some strategies to maximize profits in options trading?

**Tip:** When buying put options, you profit when the stock price decreases. Make sure to analyze market trends and news to make informed decisions.

Learn how to calculate profit or loss from buying a put option with a detailed example problem. Understand the concepts of strike price, premium paid, and intrinsic value. Suitable for investors and finance professionals.

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