A Speculator Purchases a Put Option on Treasury Bond Futures

A speculator purchases a put option on Treasury bond futures with a September delivery date with an exercise price of 85-00. The option has a premium of 2-00. Assume that the price of the futures contract decreases to 82-00 on the expiration date and the option is exercised at that point (if it is feasible) . What is the net gain?

A) $1,968.75
B) $3,750.00
C) $3,000.00
D) - $2,000.00
E) $1,000.00

Correct Answer:

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