You Sold Ten Put Option Contracts on PLT Stock with an Exercise

question 88

Multiple Choice

You sold ten put option contracts on PLT stock with an exercise price of $31.20 and an option price of $1.20. Today,the option expires and the underlying stock is selling for $33 a share. Ignoring trading costs and taxes,what is your total profit or loss on this investment?

• A) -$3,300
• B) -$1,200
• C) $120
• D) $1,200
• E) $3,300

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Definitions:

Implicit Costs

Also known as imputed or opportunity costs, they refer to the value of resources used in production that are not directly paid for or accounted for as expenses.

Team Production

A process in which a group of individuals with diverse skills and expertise work together towards a common production goal, enhancing efficiency and outcomes.

Contracting Out

involves a business hiring external organizations to perform specific tasks or services rather than using its internal resources.

Shirking

The act of avoiding or reducing work effort, especially in situations where it is difficult for employers to monitor or control employee behavior.