If You Sell a Put Option, Your Maximum Profit Potential

question 45

Multiple Choice

If you sell a put option, your maximum profit potential is equal to:

• A) Max[stock price - exercise price, 0].
• B) Max[exercise price - stock price, 0].
• C) the option premium.
• D)the exercise price minus the option premium.

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Definitions:

Distinctive

Having unique or characteristic qualities that distinguish something or someone from others.

Mechanistic System

A structure or process that is highly organized, often rigid and hierarchical, resembling a machine in its function.

Formal Rules

Explicit, written guidelines and regulations that govern behavior and processes in organizations and societies.

Rigid Hierarchy

A strict, inflexible organizational structure with clearly defined levels of authority and a top-down approach to management.