Gerold purchased 3 put option contracts at an option premium of $.95 and a strike price of $40. At expiration, the stock price was $42.25 per share. What is his percentage return?
A)−100.00%
B)0%
C)15.79%
D)21.62%
E)31.58%

Question

Quizplus · Accepted Answer

Since the stock price at expiration ($42.25) is higher than the strike price ($40), the put options are out of the money and expire worthless. Therefore, Gerold loses the entire premium paid, which is a 100% loss.

Gerold Purchased 3 Put Option Contracts at an Option Premium