A University Student Holds a Put Option for a BHP

question 53

Multiple Choice

A university student holds a put option for a BHP share with strike price $24 and premium $2. If the spot price at expiry date is $20, she will:

• A) let the option lapse and make a loss of $2.
• B) exercise the option by buying at $24 and then sell at $20 for a net profit of $2 after allowing for the premium.
• C) exercise the option by selling at $24 and then buy at $20 for a net profit of $2 after allowing for the premium.
• D) buy at $20 in the spot and then buy an option costing $2 for a net profit of $2.

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Definitions:

Porfirio Díaz

was a Mexican general and politician who served as President of Mexico for seven terms, overseeing a period of significant economic modernization and foreign investment, known as the Porfiriato.

Civil War

A significant internal conflict fought in the United States from 1861 to 1865 between the Northern states (Union) and the Southern states that seceded to form the Confederate States of America, primarily over issues of slavery and state sovereignty.

Mexican People

denotes the citizens or natives of Mexico, a country in North America with a rich culture that blends indigenous and Spanish influences.

Internal Affairs

An area of governmental or organizational activity focused on matters within its own operations or borders, often related to law enforcement or administrative policies.