You buy a call-on-put option. The underlying put option has a premium of $12.59, a strike price of $100 and time-to-maturity of 0.62 years. The call option has a premium of $2.76, a strike price of $13 and time-to-maturity of 0.30 years. When the call is about to expire, the underlying put is worth $14.79. When the put is about to expire, the underlying asset is worth $74.68. Assume that you do not exercise the call early or sell it and that if you end up with the put, you do not exercise it early or sell it, either. What is your net payoff from this entire position? Answer: 131.54 x Compound options are not complicated if you understand regular options. Just make sure that you think through the extra step and remember that a compound option is (obviously) an option on another option. The correct answer is: 9.56