Three months ago you bought for $4 a put option on a stock with an exercise price of $100.If the stock price at expiration of this option is $92,what is your return on investment?
A) 200%
B) 150%
C) 100%
D) 50%

Question

Quizplus · Accepted Answer

Since the exercise price is $100, and the stock price at the expiration is $92, the option can be exercised to sell the stock at the higher price of $100, resulting in a profit of $8 per share. The option costs $4, so the return on investment is ($8 profit - $4 option cost) / $4 option cost = 100%.

Three Months Ago You Bought for $4 a Put Option