You Purchased Eight Put Option Contracts with a Strike Price

question 94

Multiple Choice

You purchased eight put option contracts with a strike price of $30 and a premium of $1.10. What is the total net amount you will receive for your shares if you exercise this contract when the underlying stock is selling for $26.50 a share?

• A)$23,120
• B)$20,320
• C)$1,920
• D)$2,800
• E)$21,200

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Definitions:

Economic Order Quantity

A calculation that determines the optimal order quantity that minimizes total inventory costs, including holding, ordering, and shortage costs.

Safety Stock

An extra quantity of inventory kept on hand to prevent stockouts caused by unpredictable demand or supply delays.

Inventory Management

The supervision of non-capitalized assets and stock items, aiming to ensure that items are available when needed without overstocking.