An investor has unrealized gains in 100 shares of Amazin stock upon which they do not wish to pay taxes. However, they are now bearish upon the stock for the short term. The stock is at $76 and he buys a put with a strike of $75 for $300. At expiration the stock is at $68. What is the net gain or loss on the entire stock/option portfolio?

Question

Quizplus · Accepted Answer

The net gain or loss on the entire stock/option portfolio is calculated as follows:
(($68 - $76) * 100) + (($75 - $68) * 100) - $300 = -$400
This means that the investor has a net loss of $400. Therefore, the best choice is C, which represents a net loss of -$400.

An Investor Has Unrealized Gains in 100 Shares of Amazin