Under What Circumstance Will the Buyer of a Put Option

question 121

Multiple Choice

Under what circumstance will the buyer of a put option be asked to perform his or her obligation?

• A)When the stock price has declined below the strike price.
• B)When the stock price has increased above the strike price.
• C)The put buyer has an equal obligation regardless of the relationship between stock and strike prices.
• D)The put buyer has no obligation whatsoever.

---

Definitions:

Purely Competitive Market

An economic setting where numerous purchasers and vendors exist, offering identical products, with free entry and exit in the market.

Total Variable Cost

The overall cost that varies directly with the level of output, including expenses like labor and material costs.

Supply Curve

An illustrated diagram depicting the connection between an item's price and the volume of the item that providers are ready to sell.

Purely Competitive Industry

A market structure characterized by many small firms producing identical products where no single firm can influence the market price.