The Price of a Stock on February 1 Is $124

question 15

Multiple Choice

The price of a stock on February 1 is $124.A trader sells 200 put options on the stock with a strike price of $120 when the option price is $5.The options are exercised when the stock price is $110.The trader's net profit or loss is

• A) Gain of $1,000
• B) Loss of $2,000
• C) Loss of $2,800
• D) Loss of $1,000

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Definitions:

Gain on Sale

The profit realized when an asset is sold for a price higher than its book value.

Indirect Method

A cash flow statement methodology that adjusts net income for changes in non-cash transactions and working capital to calculate cash flow from operating activities.

Net Cash Flow

The difference between a company's cash inflows and outflows within a given period.

Operating Activities

These activities involve the primary, day-to-day operations of a business, such as selling products, providing services, and incurring operating costs.