Assume you purchased the right to sell 2,000 shares of JC Penney stock in January 2013 at a strike price of $27 per share. This is a put option. For this January 2013 option the Bid is $1.35 and the Ask is $1.41.

Suppose the stock sells for $25 per share immediately before your options expiration. What is the rate of return on your investment? What is your rate of return if the stock sells for $29 per share?