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?
A) -$540
B) -$400
C) -$70
D) $70
E) $400

Question

Quizplus · Accepted Answer

The put option gives the right to sell at $50, but since the stock is $54.70, the option is worthless. The loss is the initial cost of the option, which is $0.70 per share. Assuming 100 shares per option, the total loss is $70.

Six Months Ago, You Purchased a Put Option on ACC