Tim Purchased 5 Put Option Contracts on Western Fields Stock

question 66

Multiple Choice

Tim purchased 5 put option contracts on Western Fields stock. The strike price was $35 and the option premium was $.55. At expiration, the stock was selling for $35.75. What is the payoff on the option contracts?

• A)−$60
• B)−$30
• C)$0
• D)$30
• E)$60

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Definitions:

Stock Repurchase

The process by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares.

Cash Dividends

Payments made by a corporation to its shareholders out of its profits or reserves in the form of cash.

Tax Laws

are the legal rules and regulations governing how individuals, businesses, and other entities are taxed by the government.

Capital Gains

The profit from the sale of a capital asset, such as stocks or real estate, over its purchase price.