An investor has purchased 5 put option contracts at a price of $3.86. The options have a strike price of $80. If the stock price at expiration is $86.27, what is the profit from this transaction?
A) $1,205
B) -$1,930
C) -$5,065
D) -$2,430
E) $3,135

Question

Quizplus · Accepted Answer

When purchasing a put option, the profit is calculated by subtracting the strike price from the stock price at expiration and then subtracting the cost of the option.

In this case, the stock price at expiration is $86.27 and the strike price is $80, so the profit per option contract is:

($80 - $86.27) - $3.86 = -$9.13

Since the investor purchased 5 option contracts, their total profit is:

-$9.13 x 5 = -$45.65

Therefore, the correct answer is B: -$1,930.

An Investor Has Purchased 5 Put Option Contracts at a Price