Justin Freez Purchased a Put Option on General Auto's Common

question 100

Essay

Justin Freez purchased a put option on General Auto's common stock at $2.90. The put has a striking price of $40 and General Auto's common stock is priced at $42.00. What is the most that Justin can lose on the put option purchase?

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Definitions:

Standard Hour Plans

Compensation systems where employees are paid a set rate for each unit of time worked, calculating earnings based on the number of hours worked at a predetermined rate.

Automobile Dealerships

Businesses that specialize in selling new or used cars at the retail level, often under a dealership contract with an automaker.

Straight Piecework

An incentive plan under which employees receive a certain rate for each unit produced.

Unit Produced

A measure of output that quantifies the total amount of goods or services produced by an individual, team, or organization within a given timeframe.