Three months ago,you purchased a put option on WXX stock with a strike price of $60 and an option price of $.55.The option expires today when the value of WXX stock is $62.50.Ignoring trading costs and taxes,what is your total profit or loss on your investment?

Question

Quizplus · Accepted Answer

Since you purchased a put option with a strike price of $60 and the stock price at expiration is at $62.50, the option is out of the money and worthless.

Your total investment, therefore, is the premium paid for the option, which is $0.55 per share. Since each options contract represents 100 shares, the total premium paid is $55.

Since the option expired worthless, you did not receive any money, and your total profit or loss is simply the premium paid, which is -$55.

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