The price of a December put futures option is quoted as 5-52. Each Treasury bond futures contract is for delivery of $100,000 in Treasury bonds. What is the cost of one contract?
A) $5,520.00
B) $5,812.50
C) $6,625.00
D) $8,250.00

Question

Quizplus · Accepted Answer

The price of the put futures option is quoted as 5-52, which means the premium is $5,520 ($5 x $100,000), plus an additional $520 for every basis point below 52. Since the basis point is not specified, we assume it is zero and the total cost of one contract is $5,520.50. Therefore, the best choice is B, which is the closest to the calculated cost.

The Price of a December Put Futures Option Is Quoted