Three months ago,you purchased three put option contracts on WXX stock with a strike price of $60 and an option price of $.60.The option expires today when the value of WXX stock is $48.10.Ignoring trading costs and taxes,what is your total profit on your investment?
A)$180
B)$3,390
C)$60
D)$1,130
E)$1,090

Question

Quizplus · Accepted Answer

$3,390Each contract typically represents 100 shares. The put option allows you to sell shares at the strike price ($60) when the current market price is $48.10, giving you a profit of $11.90 per share. For three contracts (300 shares), this is $11.90 * 300 = $3,570. However, you initially paid $.60 per share as the option price, totaling $.60 * 300 = $180. Subtracting this cost from the gross profit ($3,570 - $180) gives a net profit of $3,390.

Three Months Ago,you Purchased Three Put Option Contracts on WXX