Joe Sold a Put Option on ZZZ Corp

question 59

Multiple Choice

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

• A) -$16
• B) -$8
• C) $8
• D)$16

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Definitions:

Raw Materials

Basic materials that are used in the production process of manufacturing goods, which are then converted into finished products.

Standard Cost

A predetermined cost of manufacturing, labor, and material as estimated in accordance with standards set by the company.

Direct Materials

These are raw materials that can be directly attributed to the production process of a product, such as steel for a car or flour for a bakery.

Materials Price Variance

The difference between the actual cost of materials used in production and the standard cost of those materials as budgeted.