Martin Owns 15,000 Shares of Stock That He Wants to Sell

question 378

Multiple Choice

Martin owns 15,000 shares of stock that he wants to sell sometime within the next three months. Shares of this stock are currently selling for $43.24. The stock has been increasing in price but
Martin is concerned the price might start to fall. He is not yet willing to sell his shares just in case
The price rises some more. To guarantee that he can receive at least $42.50 a share when he does
Sell, Martin could purchase _____ with a strike price of $42.50.

• A) 1,500 warrants
• B) 150 calls
• C) 15,000 puts
• D) 1,500 puts
• E) 150 puts

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Definitions:

Consumption

The use of goods and services by households or individuals for personal satisfaction or to fulfill their needs.

Artificially Excludable

Describes goods or services from which individuals can be prevented from using unless they comply with certain conditions, despite there being no natural reason for exclusion.

License Fee

A charge paid for obtaining legal permission to carry out a particular activity or to use a particular piece of intellectual property.

Marginal Social Benefit

The additional benefit to society as a whole from the production or consumption of one more unit of a good or service.