Vince, a Speculator, Expects Interest Rates to Increase and Purchases

Vince, a speculator, expects interest rates to increase and purchases a put option on Treasury bond futures with an exercise price of 95-32. The premium paid for the put option is 2-36. Just prior to the expiration date, the price of the Treasury bond futures contract is valued at 93-22. Vince exercises the option and closes out the position by purchasing an identical futures contract. Vince's net gain from this speculative strategy is $____.

A) - 406.25
B) 4,718.75
C) - 4,718.75
D) - 812.50
E) None of these are correct.

Correct Answer:

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