Three months ago,you purchased a put option on WXX stock with a strike price of $61 and an option price of $.60. The option expires today when the value of WXX stock is $63.50. Ignoring trading costs and taxes,what is your total profit or loss on your investment?

Question

Quizplus · Accepted Answer

When you buy a put option, you are hoping that the stock price will decrease, giving you the opportunity to sell at a higher price than the market value. In this case, as the stock price is higher than the strike price of the put option, you would not exercise the option to sell at $61. Thus, you would lose the option price of $.60, resulting in a loss of $60.

Three Months Ago,you Purchased a Put Option on WXX Stock