Which of the Following Is NOT True for the Writer

question 27

Multiple Choice

Which of the following is NOT true for the writer of a put option?

• A) The maximum loss is limited to the strike price of the underlying asset less the premium.
• B) The gain or loss is equal to but of the opposite sign of the buyer of a put option.
• C) The maximum gain is the amount of the premium.
• D) All of the above are true.

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Definitions:

Cash Outflow

Money or cash disbursed by a business for various purposes like operating expenses, investment, and financing activities.

Inventory Purchase

The acquisition of goods and materials that a company intends to sell or use in production, recorded as an asset on the balance sheet until sold.

Financing Activity

Transactions and events where cash is obtained from or repaid to investors and creditors, excluding those relating to operating and investing activities.

Capital Stock

The total amount of a company's share equity including both common and preferred shares, representing the initial investment in the business.