Joe Sold a Put Option on ZZZ Corp

question 88

Multiple Choice

Joe sold a put option on ZZZ Corp.with an exercise price of $40.The option expires tomorrow and ZZZ is currently trading at $28 per share.The option premium was $4 per share.What is Joe's profit <loss> per share if the option is exercised tomorrow?

• A)($16)
• B)($8)
• C)$8
• D)$16

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Definitions:

Liabilities

Financial obligations or debts that a company owes to outside parties, which are recorded on the right-hand side of the balance sheet.

Creditors

Individuals, organizations, or entities that have lent money or extended credit to another party, and thus are owed repayment of the principal amount plus any applicable interest or charges.

Recourse

A provision that allows a lender to seek financial compensation from a borrower if default occurs.

Capital Contributions

Funds or assets contributed to a company or partnership by owners or partners to increase its capital stock or equity.