I think that your formulation of probability is incorrect because it doesn't account for the progressive reduction in the total number of remaining cards from all the disposed diamond cards.
I believe the correct formulation is:
\(P = \frac{13}{52}+\frac{13}{52}(\frac{13}{51}+\frac{12}{51}(\frac{13}{50}+\frac{11}{50}(...(\frac{13}{40}+\frac{1}{40}(\frac{13}{39}))))))))))))\)
The problem is still solvable using this terribly clunky mess, albeit in a thoroughly horrible way.
First, we can quickly eliminate A and E because those are the probabilities of winning on the first reveal and losing on the first reveal, respectively.
So it is between B, C, and D, with B < C < D. There is no need to calculate the actual probability. It suffices to determine whether the solution is equal to, less than, or greater than C.
For starters we can notice that the first two terms in the above sum are:
\(\frac{1}{4}+\frac{13}{52}*\frac{13}{51} > \frac{1}{4}+\frac{13}{52}*\frac{13}{52} =\frac{1}{4}+\frac{1}{16}\)
So \(P > \frac{1}{4}+\frac{1}{16}\), since all of the terms are positive.
We can also notice that:
Answer \(C = \frac{4}{13} = \frac{1}{4}+\frac{12}{208} < \frac{1}{4}+\frac{13}{208} = \frac{1}{4}+\frac{1}{16} < P\)
Therefore the probability is greater than that of answer C, which gives us the correct answer of D.