A put option was purchased two months ago for $3.70 with an exercise price of $50. The option is exercised when the market price of the stock is $48. What is the net profit or loss to the investor?
A) $3.00
B) $2.70
C) −$1.70
D) −$2.00
Answer Key
Test name: Chapter 21

Question

Quizplus · Accepted Answer

The investor exercises the put option at $50 when the market price is $48, resulting in a gain of $2 per share. However, since the option was purchased for $3.70, the net loss is $1.70 per share ($2 gain - $3.70 cost = -$1.70).

A Put Option Was Purchased Two Months Ago for $3