Gwen Wrote a Put Option with a $15 Strike Price

question 3

Multiple Choice

Gwen wrote a put option with a $15 strike price on RDX stock when the stock price was $16 per share. The option premium was $3. What is the maximum loss (per share) that Gwen could experience on her option position?

• A) $3
• B) $12
• C) $14
• D) $15

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Definitions:

Coefficient of Variation

A standardized measure of dispersion of a probability distribution or frequency distribution, expressed as a ratio of the standard deviation to the mean.

Extreme Values

Data points that significantly differ from other observations. They can be unusually high or low and may be considered outliers.

Median

The middle value in a sorted, ascending or descending, list of numbers.

Percentile

A value on a scale of 100 that indicates the percent of a distribution that is equal to or below it.