The Seller of a Put Option on 100 Shares of Stock

question 48

Multiple Choice

The seller of a put option on 100 shares of stock makes the most profit when the

• A)option is exercised immediately.
• B)stock price exceeds the exercise price throughout the option period.
• C)exercise price exceeds the stock price throughout the option period.
• D)option is converted into shares.
• E)is not exercised until the expiration date.

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Definitions:

Net Income

The profit remaining after all expenses, taxes, and costs have been subtracted from total revenue.

Ratio

A quantitative relationship between two numbers, often used in financial analysis to assess the performance, liquidity, or solvency of a business.

Capital Account

In macroeconomics and international finance, a component of the balance of payments that records all transactions involving the purchase or sale of assets.

Ownership Interest

A stake or share in a company or asset, representing the rights and financial involvement of the owner.