Assume that you purchased shares of a stock at a price of $35 per share. At this time, you purchased a put option with a $35 strike price of $3. The stock currently trades at $40. Calculate the dollar return on this option strategy.
A) $3
B) -$2
C) $2
D) -$3
E) $0

Question

Quizplus · Accepted Answer

Since the stock currently trades at $40 and the strike price of the put option is $35, the put option is out-of-the-money and has a value of $0. Therefore, the dollar return on the option strategy is simply the cost of purchasing the put option, which was $3. Hence, the answer is C.

Assume That You Purchased Shares of a Stock at a Price