Reasons for Price Differences

If our expectations regarding the underlying price direction are correct & it decreases below or equal to the lower strike of $350, both puts are in-the-money (ITM) at expiration & the total value of the position is equal to the difference between the strike prices i.e. $370 – $350 = $20 x 100 (no. of contacts) = $2,000. Taking our initial costs into consideration, we achieve a total profit of £2,000 – $840 = $1,160.Between Strikes: If the underlying price ends up somewhere between both strikes ($351: $369), only the higher strike put expires ITM. The trade’s profit/loss then depends on how far S is above the lower strike, which will determine whether amount that can be gained from exercising the option will be greater than the initial cost of the position. The closer S gets the $350, the higher the value, & gains from the position.Breakeven: The breakeven point of the trade is the underlying price of NFLX stocks such that the value of K2 is equal to the initial cost of opening the position i.e. (K2 – Initial Cost), which is equal to £370 – $8.40 = £361.6