Six months ago, you purchased a put option on ACC stock with a strike price of $50 and an option price of $.70. The option expires today when the value of ACC stock is $54.70. Ignoring trading costs and taxes, what is the total profit or loss on this investment?

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Quizplus · Accepted Answer

Since the stock price at expiration ($54.70) is above the strike price ($50), the put option will expire worthless. The total loss is the initial cost of the option, which is $0.70 per share. Assuming standard option contracts of 100 shares, the total loss is 100 * $0.70 = $70.

Six Months Ago, You Purchased a Put Option on ACC